‘Extraordinary threats’: The federal energy minister says he’s ready to intervene in the market
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Energy minister Angus Taylor is promising to intervene in the energy market to ensure a $70 per megawatt hour (MWh) wholesale power price.
In a speech for Australian Energy Week gathering, Taylor said the government would use its generation underwriting program and market reforms to achieve the $70/MWh price target.
Taylor, who says he’s an intervention minimalist, told energy generators that if they “deliver on supply and price, we will back off”, but the government has already promised to underwrite large scale energy projects.
The government already has a shortlist of 12 projects covering gas, coal and hydro in its underwriting program.
Experts have suggested to Stockhead these will hinder private investment in the sector because the projects will not be exposed to the risk of private markets, with business models backstopped by the government.
Taylor named the reliability guarantee, part of the now-buried National Energy Guarantee policy, as one reform which aims to ensure there is always adequate power supply throughout the year.
The government has been threatening to intervene in some way since late last year, when Prime Minister Scott Morrison threatened forced asset divestments to break up the largest power generators and a regulated basic power price.
Taylor said on Wednesday that record investment in renewable energy combined with the planned end of ageing coal fired power plants was seriously threatening stability, and they’d put a premium on “24/7 reliable supply”.
“One of the things we need to see is the right mix of investment,” he said, although without specifying what that mix would be.
Frontier Economics managing director Danny Price called the intervention threats “quite extraordinary”.
“It’s effectively the renationalisation of the national energy market (NEM),” he said on Wednesday. “The NEM is such a mess now, it’s a monstrosity.”
He said government intervention in the energy market has been ramping up for some years.
He cited government support for renewable energy, the Australian Energy Market Operator’s (AEMO) interventions in South Australia and attempt to better manage the whole east coast grid via its Integrate System Plan (ISP), an the Finkel review into the energy market.
Labor, had they won the election, were promising even deeper interventions.
They wanted to use the Clean Energy Finance Corporation (CEFC) to invest directly in renewable energy projects if the Senate refused to pass the revived NEG, use the Australia Domestic Gas Security Mechanism (ADGSM) more widely to reserve gas in Queensland for local use, and invest directly in gas pipelines in Queensland and the Northern Territory.