Labor’s proposed $15 billion taxpayer-backed interventions in energy markets risk crowding out private investment in low-emissions technology and might cause households to delay buying batteries between now and the federal election.
Amid a renewed “carbon tax” scare campaign by the Morrison government, a senior Labor source said it would shield trade-exposed heavy emitters to protect the union-aligned heavy manufacturing industry.
“There is no way we will do anything other than give them a heavy shield to ensure their international competitiveness and that is our historic pattern,” the source said.
Energy players supportive of pricing carbon and cutting emissions are worried Labor’s climate policy has a raft of unintended consequences and could repeat the industry’s past mistakes of “gold plating” the power network, adding to consumer price pressures.
If Labor can’t secure bipartisan support for the business-backed National Energy Guarantee, which is opposed by hard -right conservatives, it would rely on other regulations to achieve a 45 per cent emissions reduction cut and 50 per cent renewable energy target.
The policies will include a carbon price on heavy polluting industries via a revived baseline and credit scheme, a $10 billion injection into the Clean Energy Finance Corporation, a new $5 billion Energy Security and Modernisation Fund and $200 million of handouts for household batteries.
Awaiting more details
Paul McArdle, analyst at WattClarity and head of energy software company Global-Roam, said both sides of politics were “villains” in the energy policy “train wreck” and he was concerned about Labor’s announcements.
“I would not be surprised if, following the announced $2000 funding for residential batteries, there are some potential customers who have decided to defer their purchase decisions until after the election,” he said.
“It amazes me that this happens now, when Victorian Labor experienced a similar thing only a few short weeks ago in the lead up to the state poll, as a result of which they had to bring forward the incentives so as not to kill the industry they were trying to support.
“We’re all still paying the cost of our politicians’ inability to establish a long-term cost path for carbon, and then get out of the way indefinitely.”
Most big energy companies were still awaiting more policy details before commenting publicly. Behind the scenes there is angst that Labor was planning to insert itself in areas where the private sector was already innovating and shifting to lower-emissions technology.
‘Planning for the worst’
Grattan Institute energy program director Tony Wood said Labor was “hoping for the best” with the NEG and “planning for the worst” with its household battery scheme and $5 billion fund.
“If NEG fails, the other path would be an extraordinarily high level of intervention in the market in ways that could spook investors,” Mr Wood said.
Due to their monopoly over consumers, electricity generators must already pass a regulator’s cost-benefit test to upgrade infrastructure in order to pass the charge on to customers.
Some climate change industry participants were supportive of Labor’s direction.
Rob Fowler of the Climate Bonds Initiative said there was already plenty of appetite for renewable energy investment so the market mainly required policy stability, such as from the NEG or the existing safeguard mechanism which imposes benchmarks on emissions per unit of output for industry.
“Renewables will continue to be rolled out because the economics stack up by themselves,” Mr Fowler said. He said Labor’s proposed $10 billion top up to the Clean Energy Finance Corporation was an investment, because the government would derive a return.
Brian Morris, vice-president energy and sustainability at Schneider Electric, said bipartisan support for the NEG was unlikely so Labor was on the right path to focus on renewable energy storage in batteries.
“Renewables are now by far the cheapest source of energy and the 50 per cent target is achievable as long as we can solve the intermittency and reliability component,” he said.
“Solar and wind are commercially viable now without support, so if the government is going to stimulate something, storage and household batteries are worth supporting.”
When asked how his business might run under Labor’s proposed climate policy, Brickworks chief executive Lindsay Partridge said businesses were already paying too much.
“When the carbon tax came in, it cost us $1 a gigajoule [extra],” he said. “We were already paying about $4-6 a gigajoule. [Since then] the price of gas has more than doubled. There’s no need to [introduce it].”
Meanwhile, Labor’s Chris Bowen and Mark Butler seized on the Business Council of Australia’s criticism that the Coalition government’s proposed energy divestment powers was “exacerbating sovereign risk” with “serious adverse consequences for prices and reliability down the track”.
“These are dangerous and extreme powers that not even the competition regulator, the ACCC, recommended. In fact, ACCC chair Rod Sims told Senate estimates recently the first he learned of Scott Morrison’s thought bubble was when reading the newspapers,” Labor said.
with William McInnes