A proposal for the federal government to financially guarantee the construction and operation of new dispatchable power generation, which could include clean coal-fired plants, is expected to be taken to cabinet with the backing of the Prime Minister.
Malcolm Turnbull yesterday confirmed he would seriously consider the key recommendation of a report by the competition watchdog to underwrite and potentially subsidise new “firm” and cheap power generation for industrial and commercial users.
Signalling a possible end to the energy wars within the Coalition partyroom, the recommendation was immediately endorsed by Nationals MPs, who have interpreted it as a green light for government to intervene in supporting the future of coal generation.
Tony Abbott, one of the most vocal opponents of the government’s national energy guarantee, also backed the recommendation, saying it was a “vindication” of calls for more baseload power in the national electricity market.
Senior government sources said Mr Turnbull was personally “very supportive” of the idea and it could be considered by cabinet before the end of the year. A formal position from the government is not expected until after a meeting of the Council of Australian Governments next month, which will seek to ratify agreement for the national energy guarantee.
The recommendation was among 59 handed down in a 400-page report yesterday by the Australian Competition & Consumer Commission, which said nothing less than a radical shake-up of the national energy market would bring down prices for households and businesses.
Local energy stocks were hit by the call for pricing reform, falling 1.04 per cent as a sector. It slashed almost $1.6 billion from the market valuations of the two biggest listed power players, AGL Energy and Origin Energy.
Among key recommendations, the ACCC said elevated prices had been driven by “high and entrenched levels of concentration in the market’’ and singled out Queensland for a major overhaul. The watchdog said the state’s power generators should be split into three entities, leaving open the possibility of a sale.
State and territory governments did not escape the blowtorch, with inflated networks costs caused by unrealistic, government-imposed reliability standards identified as still being the chief culprit in rising power prices.
The report recommended writing down the asset value of the network companies to limit the rate of return on investment which dictated the annual cost recovery the companies sought, or offer rebates on network charges of up to $100 a year to customers.
The report, led by ACCC chairman Rod Sims, is being examined closely by Energy Minister Josh Frydenberg, who yesterday said he would not rule out any of the recommendations, having privately signalled to colleagues last month that there would be a deal for new coal or gas in addition to the NEG.