Fears raised over government-led Australian energy market

The federal government has agreed to potentially accelerate the development of a $1 billion gas pipeline linking the Northern Territory to South Australia in exchange for support from NXT, it has been reported.

However, the AFR claims business has warned of a creeping government takeover of the Australian energy market following a tax deal between the Turnbull government and Senator Nick Xenophon.

Since last years South Australian energy crisis, governments have played a greater role than the private sector in deciding future energy investmentsthe report said with two major announcements last month, including Snowy Hydro 2.0 and plans for a $550 million gas-fired power plant.

In the past month, Prime Minister Malcolm Turnbull announced Snowy Hydro 2.0, and South Australian Premier Jay Wetherill announced a $550 million plan for a gas-fired power plant and renewable energy battery facility.

Jennifer Westacott, Business Council of Australia CEO, was cautious of risks of a politically-led energy market in the future.

“This is a mess of our own making,” she told Sky News. “What we have to be careful of is that we don’t end up with a situation where governments are taking over the energy market.

“This has still got to have strong private enterprise making investments and running the retail sector.

“South Australia, having made these [renewable energy target] decisions, is now asking for taxpayers to pay for the projects that will turn this around.”

With the Xenophon deal agreed, there is also scope for the government to build a second pipeline from the Northern Territory to South Australia although it remains to be seen whether it will go ahead because the territory government would have to permit further gas development.

“The government foreshadowed last election it would construct a solar thermal plant in South Australia, Senator Xenophon reportedly said. This has now been elevated as a key government policy.

“It is my view that bringing energy costs down and providing energy security is of critical importance to the future of Australia, and will deliver benefits that in the short to medium term will outweigh any tax cuts to businesses, particularly given the magnitude of forecast energy price increases in coming months.”