POLITICS must be extracted from the national energy market and make it “technology neutral” to deliver affordable and reliable power supply to intensive farm industries facing dire cost pressures, like dairy and meat processing.
That’s the view of new National Farmers’ Federation (NFF) Competitiveness Committee Chair and NSW grains and sheep farmer Dan Cooper.
“What’s obvious and as everybody knows, the National Energy Market (NEM) is not working,” he said.
“It is failing and is not delivering on its original objectives to provide a reliable and low cost national energy network.
“We’ve seen political interference basically destroying the national energy market and as a result of that, poor public policy has directed investment away from energy and conversely that has driven up the cost of energy.
“Now we’re stuck in this political paradigm of knee-jerk reaction policy that’s trying to fix a problem that really can’t be solved overnight.”
Mr Cooper’s NFF Committee investigates core policy issues like the current red hot ticket item of energy affordability and reliability, amid a looming crisis, to make informed recommendations that can reduce regulatory burdens to improve farmers’ bottom lines.
The group met last week jointly with the NFF’s Natural Resource Management committee, while the energy crisis was also hotly debated at the peak farm lobby group’s members' council meeting in Canberra.
This week, Prime Minister Malcolm Turnbull and Treasurer Scott Morrison announced the consumer watchdog would review retail electricity prices, which the NFF welcomed with President Fiona Simson saying farmers nationwide had endured “skyrocketing” electricity tariffs for many years and the “frightening upward trajectory had to stop”.
The Australian Competition and Consumer Commission’s (ACCC) scrutiny of the NEM’s competition, costs and operations is set to produce a paper in six months but has until June 30, 2018 to ultimately report.
That process will add to an independent review into the reliability and stability of the NEM chaired by Australia’s Chief Scientist, Dr Alan Finkel and the government’s plans to do a feasibility study on how to spend $2 billion to boost the snowy Hydro scheme’s capacity to generate electricity.
Mr Cooper said the NFF was also conducting it own analysis of the NEM to achieve a clearer picture of the problem and how it originated while considering a “potential” solution, specific to the agricultural sectors’ needs.
“One of the potential solutions - emphasising potential - may be a market based scheme or instrument, as opposed to what’s happened in the past which is where governments have tried to pick winners,” he said.
“Wind power generation has been a major beneficiary of the Renewable Energy Target (RET) to the detriment of energy pricing and the network’s reliability.
“What we need to do is look at whether a market based system will give us what we need which is a reliable, low cost network that doesn’t impact the global competitiveness of Australian farmers, because that’s where we’re headed.”
Mr Cooper said sugar cane farmers and irrigators in northern NSW had been forced to switch-over to diesel power generation because the network had become too expensive.
He said that power-generation source was unsustainable long-term for those farmers and a market based scheme was a potential solution that needed to be explored.
“Everyone acknowledges that, as a nation, we need to play our part in reducing greenhouse gas emissions but the RET hasn’t achieved its intended objectives of balancing emission reduction targets with the delivery of reliable and affordable power supply,” he said.
“So if the RET hasn’t worked, perhaps a market based scheme where agriculture can potentially participate in selling certificates, may be an option.
“But the current system isn’t working and one point, which was emphasised by the NFF members’ council last week, was any alternative system must be technology neutral.
“So it’s not about gas, wind, solar or coal but about a technology neutral approach that delivers on the network’s core objectives and that is to provide low cost, secure supply into the network.”
Mr Cooper said the NEM’s failings had reached “breaking point” for many intensive agricultural production industries that are already under “enormous pressure” due to tightening profit margins, especially dairy.
“Whether it’s meat processing, dairy production, sugar cane, irrigators - any intensive industries with high power usage - the high cost of energy impacts their bottom lines and international competitiveness,” he said.
“The opportunities in Asia for Australian farmers are exactly that - they’re opportunities - but they’re also ours to butcher if we don’t get it right and there are many suites of public policy that we need to get right, to ensure we’re globally competitive.
“We don’t want farming to end up like the steel or car industries but that’s exactly what will happen if we make ourselves globally uncompetitive due to high energy costs.”
Mr Cooper said a presentation to his NFF committee by Australian Energy Council CEO Matt Warren last week showed the NEM was originally designed by electrical engineers and scientists and was a complicated network that required an in-depth understanding of power generation operations.
But he said political interference over the past decade had basically destroyed the NEM and that needed to be resolved, ironically, by politically-driven change.
“What we need to do is get politics out of the national energy debate and to try and find a way forward that removes knee-jerk reactions from politicians and puts us on a sustainable footing which provides what the national energy market was supposed to deliver 20-years ago because it’s just not doing that now,” he said.
“Somehow we need to remove the politics from the market and agriculture can play its part.
“Whatever the solution, it requires bipartisan agreement and everyone needs to bury the hatchet and move forward.
“Everyone must accept political interference on both sides has destroyed the national energy market, so we need to go back to the start to try and fix that problem.”
Ms Simson said sugarcane growers in Queensland had faced electricity price hikes of up to 120 per cent in recent years and SA farmers had battled rises of up to 300pc.
She said farm businesses were small businesses that can’t absorb those types of extra cost impositions.
Ms Simson said it was a reality that most rural and regional households and businesses had no or little choice of electricity provider which meant, more often than not, retailers enjoyed a monopoly situation.
“Monopolies rarely deliver positive outcomes for consumers,” she said.
Ms Simson said tariff rises for farmers had largely been driven by the over investment or “gold plating” of the assets of electricity networks and retail businesses.
She said the new ACCC inquiry did not absolve governments of the need to comprehensively address the other drivers that affect the affordability, reliability and sustainability of electricity supply – including the need to reform the NEM and the long-term, bipartisan policy settings required to support future investment in power generation.