I write to you as my local Federal member of Parliament. After the shambolic chaos of your party’s internal power plays last week that led to yet another new Prime Minister and you accidentally being elected Deputy Leader and Treasurer, I realised that the National Energy Guarantee (NEG) you had fought so hard for, though very flawed, was a genuine attempt to plot your way through the minefield of environment and energy policy.
Though I campaigned against it, and against you because of your support for coal mining, I realised that you almost achieved balancing a carbon emissions reductions target, an energy supply guarantee and some commitment to price reduction, in the face of the warring sections of your party. Here’s why I’m sorry now that you failed and what you need to do if you want to be the next leader of your party.
Your strange ‘NEG’ had three parts to it.
- An Energy Supply ‘Guarantee’
This was necessary, as domestic gas producers had taken advantage of much higher international gas prices to commit too much supply to long term international contracts, leaving not enough gas to supply the domestic market! Free market forces at work, just as your party wished! So you had to get these suppliers to commit to ‘guarantee’ sufficient domestic supply which, since it is now based on international pricing, is no great cost to them, but essential to you, and us the people
2. A Carbon Emissions Reduction Target
Presumably, in your role as Minister for Environment, you tried to wrap this into your Energy role. You chose the Paris Climate Accord target, which we all know is way too low (this week California legislated 100% carbon-free energy as their long term goal). More importantly you wanted to legislate this low target, so it would be virtually impossible to change ie increase later. You modified this at the last moment to propose to regulate it, thus providing the possibility for a future government to increase (or decrease…) that target, but this was a step too far for the Luddites in your party.
3. An Energy Price Reduction
People are getting large price increases in their energy bills, for many reasons that they don’t understand. First, the national electricity system is being gamed by the generators. We have plenty of supply, but a number of generators are only turned on when the price escalates rapidly, as demand outstrips normal supply. This is actually the key problem, but only think tanks and academics raise it. Deregulation has allowed/encouraged individual profit-oriented companies to do this ((market forces at work again, Josh!). Regulation (socialism) is required to fix it so people are treated fairly
The second cause of increased prices is that domestic gas prices have been allowed to be raised to international pricing. This is actually a good policy, as it causes peopleto review their use of gas and electricity, rather than have the government subsidise it. The same has applied to petrol prices for many years. The problem is, people don’t understand that this has been done and, not surprisingly, don’t like the resulting price increases. Leaders need to explain this to them.
The third cause is that electricity distributors have been able to be funded (ie increase their prices) by weak regulators to pay for expensive distribution systems. They have found this a good way to improve their capital assets well above what is necessary, causing further price increases, even as energy efficiencies improve, and setting themselves up well for any future drop in profitability.
The fourth cause is that Liberal governments have blamed bushfire- and high wind-related distribution failures (eg in SA) on high levels of renewables, when the real problems have been shown to be due to poor maintenance of poles and wires, a national energy system which is too slow to respond and not completely linked and competitors who make most of their profits when demand is greater than supply.
By trying to fix all these issues with one ‘NEG’, I see in retrospect your attempt to balance what proved to be unbalanceable within your party, even though it had wide grudging support in the think tanks, business community and even the Labour Party!
Now, with you being replaced by separate junior ministers for Environment and Energy, both of whom are opposed to the Environment and in favour of mining, all that seems gone… No decent carbon emissions reduction target, no guarantee of supply (though it would be a stupid company that ignored this issue now) and limited possibility to control prices…unless you regulate (socialism again!).
With an election due by May, you may be a Treasurer who doesn’t even prepare a budget, before the people throw your party out, in anger at its visionless, anti-environment policies, while we the people continue to choose renewable energy as fast as we can.
But, Josh, you now have more power than before! And you want to be Leader. As Treasurer and Deputy Leader, all the policies have to come through your department. You have even more influence than before!
The country desperately needs support for reducing carbon emissions. Your business supporters want it, for investment certainty! Why not, as Treasurer, encourage solar and wind industries? Why not save money by stopping any government financing or subsidies for coal? Why not ensure that the national energy system is linked up through improved infrastructure? Why not change the regulations to stop energy generators gaming the system? Why not encourage funding of local battery storage systems?
If you did all this, the private market and the people will invest even more and the carbon reduction target will become redundant, because we’ll achieve it – and more -without the government!
Josh, your NEG showed some creativity and imagination. Apply that now on a larger scale, explain it better to people and, who knows, if you can actually implement some policies, you might make a leader in the future. God knows, this country needs some.
One thought on “Dear Josh (Frydenberg)”
A good, unemotional review Graham. And wouldn’t it be nice if this country could get an acceptable balanced approach to energy!
However, I think your first paragraph under ‘Dear Josh’ says it all … I’d be surprised if the Aust public don’t kick the current government out at the next election. How many times can a party (Liberals or Labor) implode like this, change its stance on critical long term policies and dump a sitting prime minister. It’s a disgrace!
My local member is Michael Sukkar who I understand was one of the ‘plotters’ who sort to replace Turnbull with Dutton. He certainly will lose my vote, just as he has now lost his Assistant Minister role in the government.