The energy crisis is impacting industry across the board, including the packaging and processing sectors, which are major energy users in the manufacture of packaging and products. Ai Group's chief executive Innes Willox weighs in on yesterday's Energy Minister's meeting.
Re-establishing strong energy cooperation between the Commonwealth and the States is the most important outcome of yesterday’s Energy Ministers meeting, but just the first step to resolving Australia’s energy affordability crisis. So says Innes Willox, chief executive of national employer association Ai Group, part of the coalition of 28 industry and community bodies calling for action.
Willox says that while there is clearly goodwill among Australia’s energy ministers, that strong foundation will need to be maintained as the hurricane of high energy prices strikes Australia over this winter – and the years to come.
“Amidst soaring wholesale prices for power and gas, and with more and more energy users feeling the pinch on their bills, coordinated action is urgent. We’re encouraged by the outcomes of the initial crisis meeting of Energy Ministers convened yesterday by Chris Bowen.
“The meeting indicated some sensible directions for action.”
Willox says accelerating new clean energy is important to reduce Australia’s exposure to sky-high international coal and gas prices. Flagging aggregation and coordination of these investments to manage supply chain barriers is a new direction for policy, he says, and a major change from the fragmentation of recent years.
“A capacity mechanism does not directly address current affordability challenges, which fundamentally relate to fuel costs. But speeding the growth of renewables entails faster growth of flexible resources to firm the system,” he said
Willox suggests an appropriately designed capacity mechanism that incentivises efficient assets to make the transition work, without loading excessive costs on energy users, would be helpful. He says industry will fully participate as the design progresses.
“The agreement to re-assess the supply and demand balance in the gas market is vital. The last assessment came before the war in Ukraine. It expected vastly lower prices than those we now face; saw gas demand drifting down; and anticipated that LNG imports would play an ever-bigger role in balancing the market. Everything has now changed, and a fresh look is needed as the basis for the new plans and measures Ministers also asked for. Accelerating demand-side gas transition should be prominent in this new work.
“The flagged new comprehensive energy agreement on the transition to net zero shapes up as a very important new initiative to bring jurisdictions together and get a more coordinated, durable, and certain pathway for investment.
“Industry never expected that yesterday’s meeting would solve the crisis, and indeed it did not. It is a start. The next meeting in July will need to sign off on more specifics across accelerating new energy supply and speeding demand-side efficiency, energy management and fuel switching. And in the meantime, all levels of government will need to get financial assistance flowing to those energy users most at risk,” Willox said.
