Magazine of the Socialist Party, Australian section of the CWI

No end in sight to high energy prices

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The Turnbull government’s recently announced energy policy, the National Energy Guarantee (NEG), has the vocal support of the big coal, gas and electricity industry.

This is a clear signal. It shows that while the government claims the NEG will lead to lower consumer prices and a more reliable electricity supply, at heart the plan serves the profit interests of these companies first.

In its outline, the NEG requires energy retailers to purchase enough electricity from “dispatchable” sources – power that can be quickly turned on or off – that they can maintain power supply in periods of high demand. It also mandates that a certain amount of power must meet a target to reduce carbon emissions.

These proposals come after widespread fears that Australia is facing an energy shortage crisis. Fossil fuel lobby groups and sections of the political establishment have responded by clamouring for new investment in coal and fracking for natural gas. These dirty methods of supplying energy represent a serious threat to the environment and to local communities.

Under the current privatised system, energy retailers act as a broker between energy generators and consumers. These businesses operate in a parasitic way, charging added costs on top of the cost of generating and distributing energy throughout the network. In essence, the NEG entrusts these companies to source and sell energy as they see fit.

At the time of writing, exact policy details on how the NEG will be implemented are scarce. However, it is evident that the plan is not designed to seriously address prices – the NEG places no obligations on retailers to keep prices within the budget of working families.

It also won’t result in seriously reduced carbon emissions. The government’s proposed target, to reduce emissions by 26% of the 2005 level by 2030, is totally inadequate. It would require a massive drop in emissions from other industries to avoid a future of dangerous global warming. The profit motive gives private industry no incentive to do this.

The reality is that the “energy crisis” is entirely created by the chaos of the capitalist market. Australia is one of the world’s largest producers of natural gas, but only 31% is kept for domestic use; the rest is sold internationally. This is what led the Australian Energy Market Operator, which regulates the market, to warn of a looming shortage in a report issued earlier this year.

Furthermore, there are no real plans in place to address the long term national energy supply. The closure of the coal-fired Hazelwood power station in Victoria, while necessary from an environmental standpoint, has resulted in a real drop in electricity production alongside the loss of around 1000 jobs. The Turnbull government’s answer, the proposed Snowy Hydro 2.0 scheme, is estimated to be six years away if it happens at all.

Whether the NEG is able to successfully maintain a reliable national power supply in the short term remains to be seen. However, the NEG offers no long-term answers – it leaves the problem of planning future energy supply in the hands of the energy corporations and the big banks that finance them.

Left to the market, wealthy private investors will put their money where it is most profitable, regardless of what that means for everyone else. Due to a combination of fossil fuel subsidies from the federal government, uncertainty around energy policy because of the unstable political climate, and the high cost of developing new infrastructure, much-needed investment into sustainable renewable energy has not been forthcoming.

For their part, Labor, the Greens and One Nation have differences on policy minutia, but they all fundamentally agree with allowing private operators to make money from Australia’s energy needs. They have no real alternative to the rort that is taking place.

The solution to this artificial crisis is to take the natural wealth and infrastructure out of the grip of the profiteers and bring it into public ownership. Nationalising the energy industry would remove the profit motive and cut out the many bloodsucking layers of contracting companies and retailers responsible for high energy prices.

Energy production should be democratically planned by elected boards of consumers and workers accountable to the public, rather than dictated by CEOs and over-paid bureaucrats. This socialist model would allow real progress to be made in transitioning to renewable sources on a huge scale, creating thousands of jobs and ensuring free, sustainable energy for all.

By Jeremy Trott

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