The Future of Finkel
On 9 June 2017 the long anticipated final report of the Independent Review into the Future Security of the National Electricity Market (colloquially known as the ‘Finkel report’) was presented to the Council of Australian Government’s (COAG).
34 days later, and unsurprisingly, politics has paralysed and rendered inert the Finkel recommendations as both federal and state politicians from all sides of the chamber, as well as vested industry groups, has brought progress to a halt.
The Finkel report delivered sensible recommendations to achieve long term results for affordability, reliability, security and sustainability. The recommendations were based around the three key pillars of orderly transition, system planning and stronger governance for Australia’s energy market. The most controversial of recommendations was the ‘Clean Energy Target’ (CET), a carrot incentive to lower emissions in the energy sector to ensure Australia meets its Paris Agreement obligations.
49 of the 50 recommendations have been accepted by the Federal Government. Number 50 however ( the CET) is still undergoing ‘consideration’; aka fierce internal debate.
Due to the policy vacuum of the past decade, state governments have been left with little option but to plow ahead and create their own policies and targets with respect to renewables and emission reductions. Importunely, in doing so, state governments have ignored the fact they are a part of a National Market and changes at one end can impact the other. States missed their opportunity to come together and set a coordinated approach, meaning the energy network is being pulled, stretched and unraveled as each State redesigns its own corner of playground.
All governments have a role to play in supporting the transformation in the electricity sector. It is essential that efforts are coordinated, stable and long-term, as part of a system-wide response. A stable policy environment across all NEM regions is what is required to give the electricity sector confidence to invest in the NEM and to plan for the future. – Finkel, page 86
At last night’s COAG Energy Council Stakeholder Roundtable (try saying that 10x faster), representatives from business, industry and climate change organisations called for three things: for federal and state governments to accept Finkel as a ‘package’, the recommendations made ‘cannot be developed in isolation’, to make well thought out decisions sooner rather than later – ‘hasten slowly’ being the oxymoron du jour – and for States to abandon their individual targets if Finkel is adopted.
Recommendation 3.1, by 2020, the Australian Government should develop a whole-of-economy emissions reduction strategy for 2050 has been accepted. The Federal Government has accepted it needs to develop a emission reduction strategy. Recommendation 3.2, the CET is that strategy, signed , sealed and delivered to the Federal Governments doorstep. By implementing the CET the uncertain policy climate will be removed and private investment will step back into the market. The CET will be the circuit breaker government and industry needs to restart the NEM.
What is critical now is turning the blueprint into an action plan. Small business is being crippled by rising power prices. Businesses are at risk, jobs are at risk and the economy is at risk – something must be done now.
The key issue Finkel got wrong was assuming current prices are acceptable and we need to avoid them becoming unacceptable. That ship has sailed, prices are unreasonable, unsustainable and without immediate relief, this handbrake on jobs and the economy will kill small businesses, the engine room of the economy.
What federal and state governments can do right now to provide instant price relief is to streamline the 5 minute settlement rule change, encourage voluntary write-down of asset values and keep the Solar Bonus Scheme in consolidated revenue and off consumer bills.
Small businesses need certainty, action and affordability; and they needed it yesterday.
As Matthew Warren of the Australian Energy Council said last night, without change we are facing the end of the NEM and that will come at a huge cost to the taxpayer and economy.
Watch this space for the Future of Energy Report.
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