13/06/2017 - 13:07

WA holds all the cards on energy

13/06/2017 - 13:07


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OPINION: Western Australia has always been different to the rest of the nation, and not often to its advantage, as the ongoing dispute over the GST demonstrates.

The eastern states have a crisis in the electricity and gas sectors.

OPINION: Western Australia has always been different to the rest of the nation, and not often to its advantage, as the ongoing dispute over the GST demonstrates.

However, as the eastern states energy sector descends into chaos, the WA government has been handed a winning card.

The differences over energy, and that means electricity as well as gas, are becoming more evident than ever. Amid the accusations and recriminations in other states, WA appears set for some upheaval of its own, with a gas-price war about to break out. This will bring lower prices and gas rationing in the east, because supply is being crimped and prices are soaring.

It’s the same story in electricity, perhaps because WA has been slower than other states to mothball its coal-fired power stations. However, the threat of blackouts on the eastern seaboard and in the southern states is worrying government and causing some companies to consider closing, or at least relocating their operations to jurisdictions with greater energy security.

What’s happening is a result of two government actions: an attempt to create a national energy system, a contradiction in terms because WA is unlikely to ever be connected to the eastern energy grid thanks to its remoteness; and a premature switch to renewable energy sources such as wind and solar.

Layered on top have been the poorly executed development of a liquefied natural gas business in Queensland, and government discouragement of exploration for gas.

Most great disasters involve the collision of two events. In eastern Australia there are four at work, which means there is no hope of a quick resolution.

Before considering the eastern states energy muddle, the good news in WA is that competition in the gas market will intensify from July 1 with the planned entry of AGL, one of the nation’s biggest energy companies and a business that ranks among Australia’s oldest, trading in Sydney as Australian Gas Light since 1837.

AGL and other big energy providers are able to enter the WA market due to rule changes made by the state’s Economic Regulation Authority, aided by the equally important fact that WA has an abundant supply of gas, thanks to a combination of geological endowment and encouragement of exploration and project development by successive state governments.

Over time, it is likely that WA will be in a position to re-brand itself as the ‘Energy State’, a slogan somewhat more tasteful than the ‘Golden State’ or, worst of all, ‘Home of the America’s Cup’, a 1980s shocker.

The Energy State moniker, however, would have the advantage of being true, and a powerful marketing tool for encouraging industries to relocate their manufacturing and production operations from energy-poor South Australia, Victoria and NSW.

Distance is an issue, as is the relatively small local population. For some industries, however, energy security is the key to success and, in some cases, survival.

How delicious it would be, given the treatment handed to WA by other states over GST proceeds, to launch an advertising campaign in Adelaide, Melbourne and Sydney offering the attractions of cheaper energy and security of supply in the west.

Causing a ruckus over energy would also have the effect of forcing eastern states governments to look more closely at why they have a twin energy crisis on their hands, and why it will be with them for years (perhaps decades).

The eastern electricity shortage, coupled with an unstable grid, was top of the agenda at last week’s meeting of government leaders in Hobart, where they considered a report by Australia’s chief scientist, Alan Finkel.

His report warned that the closure of Victoria’s giant Hazelwood power station could trigger blackouts next summer in Victoria and neighbouring South Australia, because wind and solar farms will not be able to plug the power gap.

Over time, renewable power sources might do the job, but that’s when a question of cost enters the equation and whether renewables can do it without taxpayer subsidies.

Gas is an even bigger mess in the east because Queensland’s ill-considered LNG projects are sucking up far more gas for export than was originally envisaged, leaving domestic customers short or facing much higher gas bills.

Gas exploration restrictions are the main driver of the supply shortfall. Excess reliance on thin beds of coal-seam gas is another, with that gas source being the same as WA (methane) but much harder to extract, and more expensive.

For the WA government, which is smarting from a fresh rejection by the other states for a fairer share of GST revenue, now is a perfect opportunity to take an aggressive stance by actively encouraging the relocation of industries from east to west.

In a way, there would be nothing new in a ‘cheaper and more reliable’ energy campaign because state differences, especially over tax rates, have been used many times by states seeking to differentiate themselves.

Energy policy differences would be far more positive than trying to win business by offering lower payroll tax rates, or death duties, an exceptionally successful move by Queensland when it abolished the tax on deceased estates, forcing other states to follow.

WA as the ‘Energy State’ would be hard for most other states to follow because WA has the full suite of energy sources – coal, gas, solar, wind, and uranium (if it is ever mined).


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