Short term actions must come with long term plans

Business Council of Australia

National Cabinet’s energy plan delivers welcome relief for households and small businesses but without careful management the long-term consequences of dramatic intervention could end up making the problem much worse, Business Council chief executive Jennifer Westacott said.

“This is a hugely complex system and there are no easy answers. It’s good that state and federal governments have found a way through but this plan comes with big challenges.

“Targeted support for households and small businesses dealing with record energy costs will be welcome relief but without careful management price caps will have long-term consequences that drive up and sustain higher prices for consumers.

“Today’s short-term actions will need to be matched with a commitment to driving long-term reform if Australia is serious about avoiding another decade of energy uncertainty.

“Price caps for gas and coal will send the wrong signal to investors at a time when we need to be getting new supply into the market but a clear exit strategy and a commitment to getting on with reform could help limit the damage.

“We can’t control the global energy chaos helping push up prices but we can avoid making it worse if we choose not to proceed with the kind of domestic ad hoc intervention and failure to plan that got us here in the first place.

“Energy Ministers’ commitment to a Capacity Investment Scheme is a good start but the exclusion of gas and coal will limit its ability to drive stability, certainty and reliability. Getting this up and running by 2023 will be a big challenge and we urge state and federal governments to make it a priority.

“The worst thing for our transition and the community would be a system that simply flicks the switch off on old generation, driving price spikes, putting the reliability of the system at risk and sending perverse investment signals.

“If some states won’t agree on an energy agnostic mechanism to firm capacity we risks forcing each jurisdiction along with the market operator into ad hoc, uncoordinated action just to keep the lights on, that risks putting even more upward pressure on prices.

“We need a system that delivers predictability and reliability, we’re concerned about whether the assumptions underlying the Capacity Investment Scheme reflect the known and available technologies needed to deliver it.

“The simple reality is that coal and gas will be critical to our energy system in the years ahead but that does not mean stepping back from our net zero target and doing as much as technically possible early.

“Australia’s energy system has been stuck in a loop for too long, and Australians are paying the long term price of short-term action.

“We need a planned transition that keeps energy affordable for big users and households, and that means building the new system before we turn the old one off.

“Businesses want to work with the government to manage this crisis in way that doesn’t compromise the long term objectives of reliability, affordability and security.”

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