Boosting competition in energy markets while spurring the take-up of more renewable energy is the "delicate balancing act" facing new Environment and Energy Minister Josh Frydenberg as he musters state and territory energy ministers for their first joint meeting after the federal elections.
Mr Frydenberg told Fairfax Media he was aiming for "significant reforms" to be set in train at Friday's Council of Australian Government ministers' meeting in Canberra as governments seek to avoid a repeat of South Australia's recent spike in power and gas prices.
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"South Australia was a wake-up call," he said. "It does sheet home the need to maintain the reliability of supply for energy security, as well as the affordability."
Among the issues to be discussed at COAG will be the introduction of daily auctions of gas pipeline capacity to increase transparency and competition.
"Currently, the vast majority of gas contracts are long term, bilateral and secret, which means there's not as much competitive pricing tension as there should be," Mr Frydenberg said, noting gas prices surged four-fold compared with long-run costs during the recent wholesale market turmoil.
'A very good thing'
Also on the agenda will be the introduction of new storage options such as batteries and pumped hydro to speed the introduction of more renewable energy sources and smooth out energy prices.
"There is a major transition under way to a lower-emissions future and that's a very good thing," Mr Frydenberg said.
During the past five years alone, eight of the 12 most emissions-intensive power stations closed – all of them coal – and AGL's Liddell plant in NSW's Hunter Valley is slated for closure by 2022, he said.
![Josh Frydenberg, the new Environment and Energy Minister, is expected to have a tough job juggling competing interests.](/web/20160821072610im_/http://www.smh.com.au/content/dam/images/g/q/u/m/n/h/image.related.articleLeadwide.620x349.gqudhn.png/1471535163671.jpg)
Debate has raged over the trigger for the leap in wholesale energy prices in SA, which was prompted by a combination of a cold snap, untimely maintenance on a power link to Victoria, intermittent renewable supplies and a shortage of gas.
A report out this week by energy analyst Bruce Mountain, however, also raise the gaming by gas generators in particular.
![Wind energy copped much of the blame for recent wholesale price spikes – unfairly, according to some analysts.](/web/20160821072610im_/http://www.smh.com.au/content/dam/images/g/q/e/7/m/h/image.related.articleLeadwide.620x349.gqudhn.png/1471535163671.jpg)
Electricity prices were $1700-$8500 more per megawatt-hour than would have been expected in a competitive market, Mr Mountain estimates. Suppliers "had almost 1000 MW of spare capacity up their sleeves", he said in the report.
Mr Mountain, a director at energy consultants CME, said changes such as pipeline capacity auctions, while helpful, were of secondary importance to making governance of the energy markets more accountable to consumers: "Right now we have somewhat bizarre electricity prices, bizarre outcomes in wholesale and retail [energy] markets, and that's where the focus should be."
![AGL's Liddell power station in the Hunter Valley may be the next big coal plant to close.](/web/20160821072610im_/http://www.smh.com.au/content/dam/images/g/j/f/q/a/z/image.related.articleLeadwide.620x349.gqudhn.png/1471535163671.jpg)
Adam Bandt, the Greens energy spokesman, said the National Electricity Market governance should make emissions reductions an objective – an element missing when the main grid serving Australia's easterns states was founded.
"Our National Electricity Market is out of date and incapable of managing and driving the shift to clean energy," Mr Bandt said, adding the Greens would seek to have Parliament amend the national electricity laws to make cutting pollution an over-riding goal if the ministers don't act.
![Community groups are to gather at Friday's COAG talks to urge ministers to resist a push against renewable energy.](/web/20160821072610im_/http://www.smh.com.au/content/dam/images/g/p/p/h/x/1/image.related.articleLeadwide.620x349.gqudhn.png/1471535163671.jpg)
'All-time low'
Andrew Richards, chief executive of the Energy Users Association of Australia, said its members supported the need to address climate change but said poor decisions and the "unintended consequences of conflicting policy and regulation" meant the ability to compete with overseas rivals was being undermined.
"We are hopeful that the COAG Energy Council will also recognise the need to deliver fairer outcomes for energy user," Mr Richards said in a statement. "Unfortunately, many feel let down by policymakers and regulators so their belief in markets evolving to deliver better value or governments ability to affect positive change is at an all-time low." Also up for debate will be whether gas supplies can be increased by treating coal seam gas (CSG) projects on a case-by-case basis, compared with regions with moratoria on the controversial industry such as Victoria.
![NSW government has signalled it wants more coal seam gas – despite AGL tossing in the towel.](/web/20160821072610im_/http://www.smh.com.au/content/dam/images/1/3/w/p/5/v/image.related.articleLeadwide.620x349.gqudhn.png/1471535163671.jpg)
"It's very important we focus on the needs of the local community, and taking into account any impact on environment and agriculture," Mr Frydenberg said. "The federal government is an interested observer and sometimes will be directly engaged, but by and large these are state matters."
Lily D'Ambrosio, Victoria's energy minister, said the government would respond to recommendations of an upper house inquiry into CSG later this month.
"We appreciate that there are significant concerns within the Victorian community about unconventional gas exploration and the extraction methods used," Ms D'Ambrosio said.
Victoria would also aim at COAG to ensure any shift to so-called cost-reflective power prices only advanced in ways that helped consumers, she said: "The Turnbull government is trying to stop this, despite many families expected to be worse off under the change." A spokesman for Anthony Roberts, NSW energy minister, said the government "has been a strong advocate for reforms that will ensure greater openness and transparency in the east coast gas market".
CSG in NSW remains largely stalled after energy giant AGL pulled out of a planned project near Gloucester on the state's mid-north coast region amid ongoing protests in February and will shut down its Camden gas field near Sydney in about six years' time. Santos's venture in the Pilliga state forest in northern NSW is also largely on hold.
Community groups, meanwhile, are planning to gather at Friday's COAG talks to urge ministers to resist a push against renewable energy.
"The fossil fuel sector has mounted an aggressive attack on South Australia's renewable energy leadership in recent weeks," Leigh Ewbank, a spokesman for Friends of the Earth. "These interests are trying to undermine renewable energy's reputation and destabilise states who are taking leadership, such as the ACT, SA, and Victoria."