Mixed news for the energy sector in the carbon price package

10 July 2011

Responding to today’s Federal Government’s plans for pricing greenhouse gas emissions, esaa CEO Brad Page said there are some positive announcements for the stationary energy industry, but risks remain for the stable, competitive delivery of secure energy supplies.

“For nearly five years esaa has called for the implementation of an efficient, equitable and enduring emissions trading scheme,” said Mr Page.

“The announcements today satisfy many of esaa’s principles for such a scheme, but important questions remain to be answered.

“An improved set of arrangements for the delivery of new renewable energy technologies and the commitment for a single, national set of arrangements to address energy efficiency obligations for energy retailers, are positive announcements.”

Mr Page said the Carbon Price Package contains a lot of detail the esaa will need to work through with members before providing full and considered comments.

“But, it is immediately apparent some significant issues remain for the industry,” he said.

“The decision to seek expressions of interest to close a limited number of highly emissive generation plants will help the sector reduce its emissions and could provide timely signals to new investors in lower emission generation, but the potential significant impairment of a greater number of generation assets could send a chilling message to future energy sector investors,” Mr Page said.

“This proposed assistance may mean a few electricity generators are less financially impaired compared to the Carbon Pollution Reduction Scheme, however, a significant number of generators under this arrangement will receive nothing, but still see their asset values diminished.

“This sends an unfortunate signal to investors about the security of investing in Australian energy assets.”

Mr Page said the Government’s decision not to allow deferred payment for permits added a significant impost at a time when many generators would already be facing reduced cash flows.

“To comply with the scheme and continue to offer forward electricity contracts to consumers, once flexible prices begin, electricity generators will need access to more than $10 billion worth of permits,” he said.

“Under the last version of the CPRS the Government recognised the need to provide deferred settlement terms for permit contracts.

“However, forcing generators to pay for those permits months, if not years, before they are physically required will place an unmanageable cash flow burden on electricity generators that will make electricity more expensive.”

Mr Page said esaa is encouraged by the decision to allow access to international permits.

“It will be important any limitations on this are non-binding to ensure Australians have access to the lowest cost abatement and the necessary increases in energy prices are therefore minimised.”

Mr Page said esaa is committed to working with the Government and members of the MPCCC over the coming weeks to address these issues – and any others that may arise in consideration of the detail of the scheme – to ensure Australia is provided with a well designed emissions trading scheme that delivers new investment in a lower emission energy supply while minimising costs to consumers.


Ends.

Media contact:    Caroline Page     0421 103 089

The Energy Supply Association of Australia seeks to positively influence government policy decisions to ensure that Australia enjoys the benefits of a safe, secure, reliable, sustainable and competitively priced electricity and natural gas supply.
esaa’s 40-plus member businesses have more than $120 billion in assets and infrastructure investment plans worth over $49 billion over the next five years.

The Association is fuel and technology neutral and member businesses have investments across a wide range of fossil fuel and renewable generation technologies.