Image: Sahlan Hayes, Official Photographer of the Prime Minister.
BY ELIZABETH FABRI
THE Turnbull Government has made the decision to ditch the 50th recommendation put forward in chief scientist Dr Alan Finkel’s energy blueprint, in favour of a new energy policy that aims to deliver more affordable and reliable electricity.
The National Energy Guarantee (NEG), formed by the COAG Energy Council’s recently established Energy Security Board (ESB), will be made up of dual guarantees that require electricity retailers across the National Electricity Market (NEM) to meet their load obligations with a portfolio of resources.
The first, a ‘reliability guarantee’, will be set by the Australian Energy Market Commission (AEMC) and Australian Energy Market Operator (AEMO), to deliver the right level of dispatchable power needed in each State through ready-to-use sources such as pumped hydro, batteries, coal and gas.
An ‘emissions guarantee’ to be determined by the Commonwealth and enforced by the Australian Energy Regulator (AER), will also be implemented to ensure Australia meets its Paris targets.
Prime Minister Malcolm Turnbull described the new plan as a “game-changer” to encourage investment in all forms of power, while driving down prices for consumers.
“Past energy plans have subsidised some industries, punished others and slugged consumers, the Government will take a different approach,” Mr Turnbull said.
Under the NEG, coal, gas, hydro and biomass will be rewarded for their dispatchability, while wind, solar and hydro will be recognised as lower emissions technologies but will no longer be subsidised.
This would in turn give energy retailers full flexibility to mix and match the type of generation they want.
“Our plan has no subsidies, no certificates, and no tax,” he said.
“It creates a level playing field for the first time; no more industry policy, no more picking winners, no more favouring one technology over the other, but simply ensuring that we have a reliable energy system, that we keep the lights on, that we do so in a way that is affordable and of course meet our international commitments.”
In a letter addressed to Federal Energy minister Josh Frydenberg, the ESB stated typical household bills would fall by an average of $110-$115 per year between 2020 and 2030. “Wholesale prices are expected to decline by 20-25 per cent per annum over the same period,” the ESB stated.
However, AEMC chair John Pierce, who also sits on the ESB, told Sky News some modelling showed the saving could be as low as $25 a year in 2020.
ESB chair Dr Kerry Schott said the obligation to have a reliable power system was now intimately linked with an emissions reduction target.
“If you don’t have those two things linked together, you have a danger of an increase in intermittent renewables without having a reliable and dispatchable power to go with it,” Dr Schott said.
“And it’s very important that you always have dispatchable power where you have intermittent resources.”
“It not’s Australia that is just facing this issue, it’s an issue all countries are facing as the penetration of renewables is going up.”
Dr Alan Finkel said he was pleased the Federal Government had asked the ESB – one of the key recommendations from his review – to provide advice on the matter.
“Consisting of the energy market regulators and an independent Chair and Deputy Chair, it is the country’s most authoritative voice in energy matters,” Dr Finkel said.
“Success of the proposed emissions and reliability guarantees in the National Energy Guarantee will depend on extensive consultation by the Energy Security Board with all market participants.
“With the adoption of a process for an orderly transition, Australia will be able to strategically manage its electricity supply for maximum benefit.”
The COAG Energy Council will meet in November to discuss the policy plan.
NATIONAL ENERGY GUARANTEE: THE REACTION
“At first inspection, the National Energy Guarantee offers a new way to cut emissions. The guarantee will impose new obligations on electricity retailers to deliver dispatchable power while reducing the emissions intensity of their generation mix. It will be vital that there is certainty about these obligations and the regulatory arrangements do not inhibit the entry of new retailers.”
APPEA chief executive Dr Malcolm Roberts
“The Turnbull Government has confirmed that Cabinet has adopted a national energy policy without any economic modelling or a Regulatory Impact Statement. Malcolm Turnbull has refused to guarantee his policy – the so-called National Energy Guarantee – will actually lead to a fall in power prices. It’s a guarantee without a guarantee!”
Shadow Energy minister Mark Butler
“The key factor that will decide the success or otherwise of this proposal will be whether it can achieve the necessary bipartisanship and COAG endorsement. Without that we won’t achieve policy stability and we will continue to see the investment uncertainty that has occurred over the past decade in the energy sector.”
Australian Energy Council chief executive Matthew Warren
“The National Energy Guarantee gets a big tick from me in terms of improvements it will bring regarding energy reliability. However the focus on emissions should not come at the expense of affordability. The NEG will only work if it enables investment in coal-fired power. So what we need is for the Turnbull Government to provide kick-starter funding for the construction of a new High Efficiency Low Emissions (HELE) coal-fired power plant.”
Nationals backbencher George Christensen
“The Clean Energy Target was the best opportunity in years to lock in the long-term bipartisan energy policy needed to encourage investment in cleaner energy while improving system reliability and pushing down power prices. We are obviously waiting to see more detail on the policy, but media reports suggest the new policy would result in a substantial slowdown in levels of investment in clean energy.”
Clean Energy Council chief executive Kane Thornton
“We still need to examine the details of the new NEG. If it provides more certainty to the energy industry, that will be welcome. However, it has to be part of a wider plan to improve Australia’s energy system. The NEG needs to be complemented by serious action on energy efficiency to deliver the affordable, reliable, clean energy that Australians deserve.”
Energy Efficiency Council chief executive Luke Menzel