A market not worthy of the name: state capture to blame for energy crisis

We’ve seen it with the big banks, we’ve seen it with the Crown and Star gambling empires, and now we need to see it with fossil fuel companies — the moment the corporate abuse of power achieved through state capture becomes so egregious that a reckoning is required and significant change is delivered.

In their quest to exploit the unreliability of coal-fired power and high energy demand, electricity generators up and down the east coast so relentlessly gamed the rules of the now-suspended National Electricity Market (NEM) that they made it impossible to continue to operate.

But they’re also responsible for the long-term disaster left after nine years of inaction and climate denialism by the Coalition — an electricity generation system hopelessly underfunded and stuck in the early stages of the necessary transition to renewables.

Those nine years of failure, ameliorated only by Malcolm Turnbull’s desperate attempt to drag the Coalition closer to reality — an effort that cost him his prime ministership — were fully bought and paid for by fossil fuel companies. The coal miners, the gas exporters, the coal-fired power generators, the frackers. They bought delay and obstruction of decarbonisation, the killing of the highly effective carbon price the Abbott government inherited, the Coalition’s war on renewables, the defeat of Turnbull’s energy plans, the “gas-led recovery” and the “CoalKeeper” tax.

The result is a “market” not worthy of the name, which operates to gouge households and small businesses while gas and coal exporters make out like bandits — in the case of gas exporters, while paying virtually zero tax.

A transition with the handbrake applied

If a business-as-usual policy response was untenable yesterday, it’s far more so today after the Australian Energy Market Operator (AEMO)’s suspension of the NEM. To the imperatives of climate, national security and economic opportunity, the task of keeping the lights on now requires a dramatically accelerated decarbonisation of our electricity supply.

The crisis also illustrates that, despite the fulminations of many on the left, privatisation has played no role in our electricity sector woes. It is Queensland, where state-owned power generators Stanwell and CS Energy dominate the market, that has seen the biggest price rises. Price rises have been lower in NSW, which sold its generators nearly a decade ago, and price rises in South Australia and Victoria, privatised in the 1990s, have been lower still — though that also reflects the dominance of renewables in SA and the lack of brown coal exports in Victoria.

It turns out that it doesn’t matter whether a power generator is state-owned or privately owned, it will still seek to game the system to maximise profits at the expense of households and small businesses. And ironically, the intervention of AEMO has rendered that entire debate irrelevant, by effectively asserting government control of generation capacity.

Fossil fuel companies have brought it on themselves with their relentless efforts to distort public policy, prevent decarbonisation and rip off Australians. AEMO and governments shouldn’t be in any hurry to restore the operation of a broken NEM.