Cheap gas? Cheap nuclear? Yeh nah

This article deals with Federal Coalition Opposition Leader Peter Dutton’s election promise to force gas producers to reduce the price of gas for Australian consumers to $10 per gigajoule.

However, according to a debate on last night Q &A between Labor Climate Change Minister Ed Husic and his Coalition counterpart Ted Evans, Husic stated that the cost price of most Australian gas was around $7 per gigajoule with another $4 paid by the producers for transporting it to market. Evans did not contest those figures.

Accordingly, it seems Dutton believes he can force gas producers to supply gas to Australian consumers at a loss. Certainly, the Commonwealth has very wide powers under Constitution section 51(20) to regulate the activities of trading, financial and foreign corporations, including (according to case law) power to regulate prices they charge. However, it would be extraordinary if that included the power to force gas producers to pump gas from the ground and sell it at a loss!! I don’t know of any case law directly on point, but we don’t actually need any.

Section 51(31) of the Constitution gives the Federal Parliament the power to effect “the acquisition of property on just terms from any State or person for any purpose in in respect of which the Parliament has the power to make laws.”

“Just terms” effectively means a fair market price. There is no way that a law attempting to force gas producers to sell gas (their property once it is pumped from the ground) to sell it at a loss. Thus, Dutton’s proposed law will certainly invalid by the High Court if it passed by Parliament. If Dutton has access to competent constitutional lawyers then he already knows this. I can only presume he is hoping to fool enough voters before the upcoming election to allow him to win government. If so, it is one of the most cynical, irresponsible political gambits I can recall.

Clearly, Labor is aware of the situation. It already has a system of gas regulation with a price cap of $14 per gigajoule. That would almost certainly withstand constitutional challenge because it allow for a small profit for producers.

This election campaign is getting sillier and sillier, especially in the area of energy policy, and especially on the part of the Coalition. Their position is equally confusing on nuclear power. Dutton claims he can build 7 nuclear power stations for $160 billion. That might be true if small modular reactors currently existed as commercial propositions, but they don’t. The current cost of a new nuclear reactor in the United States is $50 billion (Australian). That makes $350 billion for seven of them, plus an amount for training of personnel to build and operate the reactors of (say) another $50 billion. Thus, $400 billion in total. Labor claims the Coalition nuclear plan would cost $600 billion, which is a tad exaggerated but closer to the reality than Dutton’s claims.

The true situation is that Australia can most cheaply and effectively meet its energy needs as coal plants are decommissioned between now and 2035 through a combination of wind, solar and pumped hydro. I dealt with pumped hydro in a fairly recent article here at Troppo. ANU scientists have located hundreds of suitable pumped hydro sites throughout Australia, many of them fairly close to existing transmission lines.

One possible exception to this proposition is Western Australia.  There don’t appear to be any suitable potential pumped hydro sites within striking distance of Perth.  That would be the only place where one of Dutton’s much-touted Nuclear plants might actually make sense

I am surprised that neither the media nor politicians aren’t talking much more about pumped hydro. It’s one of the many things that surprise me about Australian politics, despite a lifetime of observation and analysis.