Government’s energy plan good on paper

FEDERAL Resources and Energy minister Martin Ferguson has handed down the Government’s long-awaited Energy White Paper, outlining Labor’s objectives for developing Australia’s energy future.
Mr Ferguson delivered his assessment of the nation’s energy sector during his speech at a recent Committee for Economic Development of Australia function in Melbourne, noting the challenges the Government faced and the strategy needed to make Australia a leader in the global energy industry.
He said the Energy White Paper reflected the Government’s continued commitment to open and transparent markets that allowed “competitive pricing, efficient resource allocation and innovation”.
Mr Ferguson also highlighted Australia’s strengths, including its large natural resource deposits, competitive electricity markets, strategic global position and skilled workforce, but said there were still goals the Government wished to achieve as part of its vision for Australia’s energy future.
He said the first element of this vision was to create a level playing field through consistent market regulation across Australia with a national approach that would stimulate “competition, innovation and consumer choice”.
He said the White Paper aimed to make Australia the world’s number one destination for resource development as well as one of its largest LNG exporters, while continuing to service the domestic gas market.
Mr Ferguson said the Government’s final goal was to create an Australia that transitioned to cleaner forms of energy in time by allowing a market-based system that did not “impede its economic competitiveness.
“In a way that is driven by the market, so as not to lock in Australia to higher cost technologies than would otherwise be the case, and where we nurture Australian research and development and foster innovation in partnership with the private sector,” he said.
Noting rising energy prices as a major issue, the minister said deregulation was the key to easing pressure on domestic consumers.
“If I could highlight one area of critical reform needed to improve competition and deliver innovative solutions to consumers it would be retail price deregulation,” he said.“The key to delivering on this reform agenda – and locking in the benefits to consumers – will depend on the agreementthat can be reached by the Standing Council on Energy and Resources and then COAG [Council of Australian Governments] in December.”
Mr Ferguson also pointed out growing pressure on Australia’s east coast gas supply, but added that a domestic gas reservation policy was not a desirable solution.
“The Government acknowledges that there will be tightness in the east coast gas market as new coal seam gas and LNG projects ramp up to full production,” he said.
“Once again, it is the Government’s view that this is best achieved by open and efficient markets, where price is allowed to balance the market and provide incentives for developing new supply.
“Interventions such as reservation policies to force price or supply outcomes are more likely to impede than promote supply.”
Making the move to cleaner energy and reducing Australia’s production costs were also noted as challenges for the Government.
“Realising the potential of our energy future will require significant levels of investment in domestic infrastructure and further development of our resource base,” Mr Ferguson said.
“We currently have a pipeline of $270 billion in advanced projects on our books, with a second tranche of $230 billion less advanced projects not yet committed. “If we are to secure this second pipeline we must reduce the costs of production in
Australia.”
Industry players that have backed the Government’s rejection of a domestic reservation policy include the Australian Petroleum Production and Exploration Association (APPEA), Santos and Shell Australia.
APPEA chief executive David Byers said the decision was an important signal to investors that Australia was well worthy of investment.
“Only a market-based energy policy framework can enhance Australia’s attractiveness as a place to do business and encourage the tens of billions of dollars’ worth of gas industry investment still to be approved,” he said.
Despite welcoming an increased focus on the issues of Australia’s gas industry, Australian Pipeline Industry Association chief executive Cheryl Cartwright said the Government needed to address a looming “price bubble” where domestic
consumers would experience a massive increase in the price of gas.
“Right now, the answer to affordable gas prices is to not tinker with end markets nor gas transportation: the solution is to address gas supply and ensure that businesses threatened by a short to medium-term price hike can survive until the price levels out,” she said.
“With the vast resources of natural gas in Australia, improved access will address the supply issue, which will in turn assist in bringing prices down.
“In the meantime, Government should seriously consider whether it wants a short-term gas supply crisis to permanently damage some sectors of the economy.”
DomGas Alliance chairman Tony Peterson said the Government’s approachwas flawed, and that the Alliance push for a domestic reservation model similar to that of the US.
“Most of Australia’s gas resources are now controlled by a handful of very large producers who think in terms of multi-billion dollar LNG contracts,” he said.
“Selling to smaller Australia customers will not happen voluntarily. “These resources belong to all Australians and simply saying ‘let the market work’, as the White Paper does, is not in the national interest.”
Mr Peterson said Australia was the only country in the world where international oil companies could openly access and export gas without prioritising the local economy.
He said it was also the only major gas-producing country facing serious shortages and sharply rising prices.

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