Freer market for energy is welcome
Posted : Wednesday, December 14, 2011
Below is an opinion piece by CEDA Chief Executive, Professor
the Hon. Stephen Martin, published in the Australian
Financial Review on Wednesday, 14 December, 2011, on the Federal
Government's draft energy white paper.
In a year of less than spectacular policy successes, the Gillard
Government appears to be on the right track with its draft Energy
White Paper, recognising that market reform, further privatisation
of government owned energy assets and deregulation of retail energy
prices are the way forward. However, the continued disregard of
nuclear as a clean energy option is a fundamental flaw.
A number of positives in the draft provide the right basis for
shielding Australian households, industry and our economy in
general from the inevitable energy price rises we will face in
coming years and decades. Energy Minister Martin Ferguson has been
refreshingly honest in acknowledging that energy price rises will
be inevitable, and proposing a series of policies that endeavour to
mitigate against the negative effects.
The changing nature in demand and sources of energy in Australia
will mean the energy sector will evolve quickly in coming years and
many of these changes will not be in the control of Government. The
best policy from Government is to ensure a competitive and free
market and that's where the Energy White Paper has got it
This will ensure that it is the market that determines
everything from the economic value of energy projects that inform
investment decisions through to the size of the average household
The deregulated retail energy market in Victoria is proof this
works. While Victoria has experienced energy price increases, these
have been less than in other states due to competition among
retailers. The proposal to review policy initiatives from all
levels of government that are distorting energy investment and
bills, such as feed-in tariffs, is therefore a welcome
Once the price on carbon is introduced to be effective it is
critical that it is the primary driver of clean energy investment.
While there is a role for Government funding to support R&D and
innovation, we need to see deployment of technologies where the
economics stack up if they are to survive long-term.
The carbon tax will allow the market to decide which clean
energy technologies are economically sustainable. It is vital this
is allowed to happen without price distortions from other policy
initiatives favouring deployment of specific technologies.
While the draft White Paper supports full privatisation and
deregulation of energy assets the big question is how quickly and
how far governments are prepared to go to ensure this is
implemented. The economy is littered with partial privatisations of
public assets that fail the efficiency and productivity enhancement
tests. It must not be allowed to happen in the energy sector.
What the energy sector needs right now is clear and secure
policy settings that ensure they can make long-term investment
The other concern is the omission of nuclear energy. Australia's
economic prosperity has been hard won and this has been
significantly aided by our abundant natural resources, including
low-cost energy sources such as coal. Setting targets and spending
billions on renewable energy research and programs may contribute
to a cleaner, greener future but as we move into a carbon
constrained economy, nuclear must be recognised as viable
While there are political constraints and sensitivities around
nuclear energy, tough decisions need to be made in the national
interest. It is most certainly in the national interest (not to
mention political interest) to keep household and industry energy
costs as low as possible if we are to continue to protect our
economy from the impacts of global economic uncertainty and the
cost of mitigating carbon-emissions.
Minister Ferguson has acknowledged that while nuclear was not
part of the Government's current policy for clean energy options,
he expected if the promised or anticipated technological
breakthroughs in other sources did not eventuate the debate on
nuclear would intensify. CEDA's concern is will this be too late?
If climate change wasn't an issue, nuclear wouldn't need to be on
the table. But it is, and we need to start shifting to low-cost
clean accessible energy supplies. Renewables simply do not
currently offer a reliable base-load solution. They may in the
future but realistically we are looking at 20 to 30 years away. By
then the damage to our economy of skyrocketing energy costs will be
done and it may take decades to recover lost ground.
Nuclear energy provides a proven, low-emission, low-cost
technological option at a time when there appears to be no others.
That is why CEDA will continue to support the full consideration by
policy-makers of nuclear energy as a long-term, clean energy source
for Australia's economic prosperity.
By CEDA Chief Executive, Professor the Hon. Stephen Martin
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