More broadly, expansion of the nation’s transmission infrastructure continues. APA Group’s Bonaparte pipeline was completed early in December, Epic Energy’s QSN pipeline became operational in January and the Stage 5B Expansion of the Dampier to Bunbury Natural Gas Pipeline has commenced. This has kept many in our industry very busy.
All this infrastructure and a lot more will be required so that this industry can accommodate the infrastructure needs of the nation if the federal government is correct in its view that the Carbon Pollution Reduction Scheme will drive an increase in demand for natural gas, not to mention the role pipelines may play in carbon sequestration.
The Australian Energy Market Commission (AEMC), in its first paper on the impact of climate control policies on regulatory frameworks, commented that “these frameworks had delivered significant investment over the past ten years.” It would, of course, be more correct to say that this investment has occurred despite these frameworks.
As we all know, pipelines are being built to order – and just to order – because of the disincentives in the regulatory frameworks. While on first appearance there appears to be nothing in the existing regulatory frameworks that is made any worse by climate change policy, we must remain vigilant, as others in the energy industry are seeking changes to further their own development agendas, and this may further tilt the playing field to our disadvantage. The field is already tilted when you consider that private investment in gas transmission pipelines must compete with electricity transmission, which is able to socialise its costs.Article continues below…
In its most recent Communiqué, the Ministerial Council on Energy states that it recognises the critical importance of timely ongoing investment; it cites the new laws, rules, greenfields incentives and ‘light-handed’ regulation as evidence of its encouragement of our industry. However, reflecting again the regulators’ failure to understand commercial imperatives, the Australian Energy Regulator (AER) proposed a weighted average cost capital for access regimes that would appear to be manifestly inadequate – with or without making allowances for the global financial crisis. I have commented previously that with this legislation, and other rules and regulations now in place, it is up to the regulator as to how well it will work. The regulator must ask itself why there would be further private investment if reasonable returns cannot be achieved. Having expressed this concern, the AER’s draft decision has been challenged and I still have confidence that, on review, the AER will make a final determination in the interests of encouraging the infrastructure development this country will need.
On the matter of ‘influencing’ policy development, I suggest a perusal of APIA’s web site (www.apia.net.au) to review the many excellent submissions and papers that APIA’s hard working committees and Secretariat have produced. These submissions are an essential tool in influencing policies and laws relevant to our industry, but they require substantial commitment from committee members and lobbying at relevant levels by the Secretariat.
To finish on a high note, the APIA Board and Secretariat spent a constructive day recently finalising the review of its Strategic Plan (last produced in 2006). We intend to have the revised Plan available in time for the 2009 APIA Convention in Cairns.
There have been many achievements, but the challenges continue.