AGL boss Andy Vesey
Finding sensible coverage of energy policy is hard. It’s a politically fraught issue, it’s immensely complex, and it’s also a subject on which everyone has a view because we all have an interest in whether the lights stay on.
On that basis, there are only two articles you need to read to get an understanding of the outcome of the government’s meeting with AGL’s Andy Vesey yesterday. One is by the estimable Giles Parkinson; the other is by the AFR’s Ben Potter. We bagged Potter in 2014 for his coverage of ANU’s decision to divest in Santos, but his reporting of energy policy has been consistently high quality.
The tenor of both pieces is something most political journalists have missed: that the government is engaged in a piece of King Canute-like theatre on energy policy — except that Canute understood the absurdity of what he was doing in ordering the tide to retreat. Malcolm Turnbull — he of the claim that the laws of mathematics don’t apply in Australia — and Josh Frydenberg might be similarly aware of the theatrical nature of what they’re doing. It’s possible, however, that they’re not. But from AGL’s perspective, the laws of maths do apply in Australia, and maths says closing the Liddell power station in 2022 makes the most sense for the company in terms of its obligations to its shareholders.
Political journalists have been more focused on the theatre than the substance. Vesey’s agreement to put to the AGL board a proposal for keeping Liddell open or selling it was thus portrayed as a win for the government rather than a pro forma face-saving measure by a company determined to comply with its legal obligations. It would be bizarre if AGL’s board did anything other than quickly dismiss the proposal and get on with the other thing Vesey promised: “a plan in 90 days of the actions AGL will take to avoid a market shortfall once the Liddell coal-fired power station retires in 2022”.
It bears repeating something that has mysteriously been absent from most coverage of the Liddell issue: there is no need to keep this old, unreliable power station running beyond 2022. The Australian Energy Market Operator’s report was clear: the risk of unserved energy demand would be reduced to negligible levels if “additional renewable generation was to be developed to deliver a national renewable generation outcome”. Nothing about keeping an old power station going long past its use-by date. Certainly nothing about governments engaging what amounts to a stealth nationalisation of assets.
That’s what we’re talking about, really: a company being placed under pressure — the pressure of co-ordinated attacks from ministers and ex-ministers, the pressure of prime ministerial bullying, the pressure of News Corp outlets waging war on the company, complete with suggestions of some form of inappropriate conduct by its CEO — to allow the government to dictate what the company does with its assets and its cash.
The Victorian Labor government, apparently, is no better; it is, we’re told, seriously considering price caps on electricity charges, which no doubt would be wildly popular. The mind boggles at this sort of thinking: there’s a fairly basic economic law that you match supply and demand either by pricing or rationing. Price caps may or may not discourage investment in electricity infrastructure investment, but they’ll be a pretty useful way of curbing price signals and thus encouraging higher usage, leading to a greater frequency of blackouts — which is a kind of rationing.
Stealth nationalisation, Soviet-style rationing — boy, but when neoliberalism dies, it really dies hard. Successive federal and state governments of all varieties have badly botched the electricity market. Now, to fix a crisis that they themselves have created, they’re abandoning everything they’ve advocated for a generation.
Policy is best not made while in a panic. But on energy, politicians currently resemble a barnyard full of headless chooks.