Federal intervention risks private investment

The Federal Government’s plan to develop a gas-fired power station in NSW if alternative private investments are not made risks deterring the very investments the Government is attempting to encourage, the Australian Energy Council said today.

The Australian Energy Council, which represents major investors in generation and the majority of Australian electricity generators, said the Federal Government’s approach may end up being counter-productive.

“The sector is struggling to make final investment decisions in an environment of ongoing policy uncertainty,” said the AEC’s Chief Executive, Sarah McNamara.

As noted by the Government’s own energy advisers, the Energy Security Board, government interventions or “even discussions and ‘threats’ of intervention” act as a deterrent.

“For more than a decade we have been warning of the dampening effect State and Federal Government interventions have on investor confidence,” said Ms McNamara.

“The Government’s earlier plan to underwrite new generation projects in the market also remains under consideration, and this too contributes to the ongoing uncertainty, together with various and competing State-based renewable energy targets,” said Ms McNamara.

“There are no material reliability concerns that would warrant this kind of interventionist approach, and there are already mechanisms in place to address any shortfall identified.  The Australian Energy Market Operator’s most recent assessment identified a potential shortfall in NSW of only 154MW.

With respect to the proposal to develop new pipelines, Ms McNamara said, “We understand and support the Federal Government’s desire to facilitate competitive access to gas, but planning should be done independently of government through Australian Energy Market Operator advice, followed by private investment in infrastructure that is not underwritten by government.”

About the Australian Energy Council

The Council represents 22 major electricity and downstream natural gas businesses operating in the competitive wholesale and retail energy markets. These businesses collectively generate the overwhelming majority of electricity in Australia, sell gas and electricity to over 10 million homes and businesses, and are major investors in renewable energy generation.