Energy policy gets a second opinion

When you don’t like the advice you receive from experts, some seek a second opinion. Energy policy in Australia has already had a rolling maul of policy advice over the past decade, and now the Federal Government’s National COVID-19 Commission (NCCC) is going to pile in to see if it can’t move things forward.

The NCCC was established by Prime Minister Scott Morrison in March as an expert advisory group to help minimise the social and economic impact of the COVID-19 pandemic. Chaired by former Fortescue CEO Neville Power, it includes an A-list of business leaders and, significantly, former Labor Minister and ACTU Secretary Greg Combet.

On the face of it the logic is sound enough: what can government do to help businesses and industries recover from the social and economic impact of the COVID-19 pandemic. The NCCC is looking in detail at most key sectors in the economy: resources, tourism, telecommunications, manufacturing, health, agriculture, transport and energy.

The energy and utilities portfolio is being headed by respected Energy Australia Chief Executive Cath Tanna. The COAG Energy Council – the Federal Government together with the states – has already recently re-organised the energy policy advice supply chain, calling upon Chief Scientist Alan Finkel to advice on policy and governance reform, which led to the creation of the Energy Security Board ESB in 2017.

The creation of the ESB effectively sidelined the Australian Energy Market Commission (AEMC) which had previously been the “go to” expert adviser for governments on energy policy. The AEMC had continued to advocate for market based policy options, in growing conflict with the Australian Energy Market Operator (AEMO) which advocated for greater government intervention to build new assets and not rely on market signals.  While the AEMC continues to sit on and provide input into the Board, it is now only one of five views.

The ESB is currently managing a review of the National Electricity Market design (post-2025 review), a reliability reserve, a Strategic Energy Plan and greater transparency in the gas market.

The cost of oil, gas and electricity have fallen dramatically in Australia in 2020 as a result of the oil glut, which is likely to keep domestic energy prices soft until the end of 2020 at least. Given energy costs do not appear to be a short run barrier to businesses getting back to work, the deeper question is what is the role of the  NCCC in guiding energy policy. More importantly, if its advice differs from the ESB or other energy policy agencies like the AEMC, which advice is adopted?

Constitutionally energy policy rests with the states, except where it relates to international agreements and commitments, like delivering on Australia’s emissions reduction commitments to the Paris Agreement. It is unclear legally how and whether the Federal Government could act on the advice of the NCCC without referring it to the COAG Energy Council.

NCCC Chair Nev Power has already been in the media talking up the role of gas in the economic recovery. but what does this mean? What would the gas industry do differently with gas prices so low that they will make new exploration and investment un-investable until global energy markets re-balance.