Tim Hornibrook: Angus Taylor signals further taxpayer investment in existing coal and gas

The new energy minister, Angus Taylor, says he’s not a sceptic about climate science, just the economics of green schemes, and he’s declared renewables are “in my blood” and have an important role in the energy system.

But while overtly backing solar and hydro, but not wind — a technology he’s long opposed — Taylor has also signalled he wants to encourage new investment extending the life of existing coal and gas plants, and upgrading ageing facilities, with an objective of boosting supply.

In his first major speech in his new portfolio, Taylor has recommitted the government to pursuing heavy-handed interventions in the energy market cooked up in the last days of the Turnbull government, including “last resort” divestiture powers to break up power companies if they engage in price gouging.

Renewables forecast to halve wholesale energy prices over four years

But while threatening to wield the big stick, Taylor also sent a clear message to power companies he would not use it if prices came down. “The simple truth is that if industry steps up and does the right thing on price, government can step back and focus on other things.”

The new energy minister said an underwriting program, where the government guaranteed finance for new generation projects, would also proceed.

Tim Hornibrook: The Australian Competition and Consumer Commission, the body that recommended the underwriting proposal to boost supply and competition, has made it clear it did not suggest the scheme as a lifeline for coal, which is what some government MPs want it to be.

In a clear nod to internal pressure, Taylor signalled on Thursday the government was intent on boosting supply, and that meant expanding existing plants, upgrading ageing “legacy” generators, as well as pursuing new “greenfield” projects.

“We need to encourage all of these,” he said. “It’s ironic that in a country with an abundance of natural resources — coal, gas, water and solar — we should be in this position.

“We need to leverage those resources, not leave them in the ground.”

Taylor backed Peter Dutton in last week’s poisonous leadership spill, and the former McKinsey consultant was critical of the national energy guarantee during the internal debate about the policy.

Thursday’s speech was silent on the fate of the Neg, and silent on whether or not Australia should withdraw from the Paris climate treaty, which is a live debate within the Coalition.

Most Australians want more renewables to help lower power prices — poll

Taylor’s predecessor, Josh Frydenberg, pursued the Neg on the basis it would create investment certainty in the energy sector, but Taylor said on Thursday: “There is some naivety in the idea that governments can largely eliminate uncertainty, or should even try.”

“Parliaments or governments can’t bind future parliaments and governments — this would be a breach of the fundamental principle of parliamentary sovereignty.”

But he says his program to reduce energy prices, which includes default pricing for consumers, will be positive for investor confidence, and will create new incentives for investment. “Re-establishing the confidence to invest will be a central goal of these reforms.”

The new prime minister, Scott Morrison, is putting Taylor, an ambitious, conservative up-and-comer, under significant early pressure to produce an outcome on power bills. Setting the performance bar high, the new prime minister has dubbed him the minister for lowering power prices.

Taylor used Thursday’s speech to emphasise that his focus in the portfolio would be on reducing power prices. He said increases in power bills had “eroded the trust of Australians in the capacity of government and politicians to deliver affordable, reliable energy”.

“We need to re-establish this trust.”

The minister gave a nod to recent reductions on wholesale energy prices, which have flowed through to retail prices, noting that prices had turned a corner.

But while there is evidence from market analysts and analysis from the government’s energy bodies that renewables has led the price drop because of a big increase in supply contracted into the market courtesy of the renewable energy target, Taylor attributed the recent reductions to the government’s intervention in the gas market, and regulatory reforms, including forcing retailers to be more transparent about their pricing.

While coal proponents in the Coalition declare new coal investment means lower prices, the Australian Energy Market Commission has predicted prices will fall over the next two years because of the entry of 5,300 MW of new generation capacity into the national electricity market — most of it renewable projects.

But the AEMC has also warned that price reductions won’t last if governments don’t settle an energy policy that provides a stable framework, including incentives for investing in dispatchable power.