But wait, there's more: the NEG and beyond
In the end result, the Turnbull Government adopted 49 out of the 50 recommendations in the Finkel Report, leaving out the one that really mattered: the Clean Energy Target. Instead, it plumbed for a National Energy Guarantee (NEG): not so much a policy as a framework. It applied two big guidelines to the electricity from 2020 onwards (when the Renewable Energy Target expires), and it left the electricity retailing companies to figure out the best way to operate within them[1].
The first guideline was the Paris carbon treaty. The NEG enshrined Australia’s Paris climate treaty commitment, and, as noted above, required the federal government to legislate a carbon emissions reduction for the electricity sector in line with Australia’s Paris pledge of a 26 to 28% on 2005 levels by 2030.
The second is that the electricity supply must be reliable. The electricity market operator would set a minimum percentage level of readily “dispatchable” power for each state, dispatchable meaning baseload power that can flow readily from batteries, gas or coal fired plants - not intermittent sources such as wind and solar.
Dispatchable power was to be scheduled by the market operator depending on the real time operating needs of the nation. The objective was to ensure that there would always be enough power to avoid blackouts. The responsibility for meeting these two guiding principles wiould fall on the electricity retailing companies, who could be fined or deregistered for breaches.
In this fashion, the new policy would obligate energy companies to source some electricity from reliable or dispatchable sources, including coal, as well as mandate them to guarantee emissions reductions[2]. In other words, responsibility for achieving emissions reduction and reliability targets was being handed to the retailers, who would need to ensure that the mix of electricity they bought met a known emissions reduction emissions reduction trajectory and mandated reliability standard, and, after the renewable energy target ended in 2020 (it was only ever temporary), there would be no requirement for retailers to buy electricity from any particular source, merely electricity whose overall mix brought about lower emissions year by year[3]. Renewables would no longer be subsidised because it was thought they were cheap enough as it was and well established in the market place, so no subsidy was needed.
This framework was the work of expert regulators, the members of the Energy Security Board, established under one of the recommendations of the Finkel Report, but there was scant modelling and the report contained no detail on how it was expected to work with no certificates, no baselines and no credits. The Federal Labor Opposition signalled that it may support the policy, but for it to be implemented, the States would also have to accept it, and, as Peter Hartcher then said, “there is no policy achievement so promising for Australia that the petty intransigence of federal state relations can’t strangle it at birth”[4]. There was also real doubt over whether the policy would do enough to meet the nation’s emissions reductions over the long term. While it was also projected that the new policy would result in savings to householders, these were anticipated to pan out at no more than 50 cents a week (from 2020), perhaps rising to $2 a week by 2030, "not even enough to buy a hamburger".
The policy received a cautious acceptance from energy and industry leaders, but big questions still remained. As a matter of priorities, Australia’s emissions target seemed to stroll in as “an optional extra” behind the twin mastheads of reliability and affordability[5]. And there were also suggestions that a default carbon price was an inevitable outcome of the new arrangements because buried in the new Energy Security Board’s advice was a mechanism to be added to the National Energy Market in two stages in 2019 and 2020 which recognised the fact that some electricity retailers would not be able to meet the required emissions profile, while others would overachieve.
Under this scenario, underachieving retailers would be able to buy an as yet undetermined portion of any National Energy Shortfall using Australian carbon credits (ACCUs) or international units[6], but the Energy Security Board denied that carbon was being priced under the scheme: What was being priced, they said was reliability, and the ability for the mechanism to be dispatched[7]. However, the real question was whether this new policy or framework, call it what you will, would meet the approval of State Government leaders at the then forthcoming COAG meeting in August 2018.
As it turned out, it didn’t. The Labor states, Victoria and Queensland plus the ACT, said it didn’t go far enough on the aspect of reducing emissions, but the Liberal party room said it went too far, and all references to emissions were removed in a revised NEG draft issued by the Prime Minister, who was deposed in the immediate aftermath of these events, and the Energy Minister.
[1] This summary from Peter Hartcher, “Bright sparks leave Abbott in dark”, SMH 21-22 Oct 2017, 32.
[2] Jacqueline Maley and Nick O’Malley, “Power Point”, SMH 21-22 October 2017.
[3] Peter Martin, SMH, 18 October 2017.
[4] Hartcher, op Cit.
[5] Peter Hannam, SMH, 18 October 2017.
[6] Peter Hannam, SMH, 19 October 2017.
[7] Peter Hannam and James Massola, Brisbane Times, 19, 20 October 2017.
The first guideline was the Paris carbon treaty. The NEG enshrined Australia’s Paris climate treaty commitment, and, as noted above, required the federal government to legislate a carbon emissions reduction for the electricity sector in line with Australia’s Paris pledge of a 26 to 28% on 2005 levels by 2030.
The second is that the electricity supply must be reliable. The electricity market operator would set a minimum percentage level of readily “dispatchable” power for each state, dispatchable meaning baseload power that can flow readily from batteries, gas or coal fired plants - not intermittent sources such as wind and solar.
Dispatchable power was to be scheduled by the market operator depending on the real time operating needs of the nation. The objective was to ensure that there would always be enough power to avoid blackouts. The responsibility for meeting these two guiding principles wiould fall on the electricity retailing companies, who could be fined or deregistered for breaches.
In this fashion, the new policy would obligate energy companies to source some electricity from reliable or dispatchable sources, including coal, as well as mandate them to guarantee emissions reductions[2]. In other words, responsibility for achieving emissions reduction and reliability targets was being handed to the retailers, who would need to ensure that the mix of electricity they bought met a known emissions reduction emissions reduction trajectory and mandated reliability standard, and, after the renewable energy target ended in 2020 (it was only ever temporary), there would be no requirement for retailers to buy electricity from any particular source, merely electricity whose overall mix brought about lower emissions year by year[3]. Renewables would no longer be subsidised because it was thought they were cheap enough as it was and well established in the market place, so no subsidy was needed.
This framework was the work of expert regulators, the members of the Energy Security Board, established under one of the recommendations of the Finkel Report, but there was scant modelling and the report contained no detail on how it was expected to work with no certificates, no baselines and no credits. The Federal Labor Opposition signalled that it may support the policy, but for it to be implemented, the States would also have to accept it, and, as Peter Hartcher then said, “there is no policy achievement so promising for Australia that the petty intransigence of federal state relations can’t strangle it at birth”[4]. There was also real doubt over whether the policy would do enough to meet the nation’s emissions reductions over the long term. While it was also projected that the new policy would result in savings to householders, these were anticipated to pan out at no more than 50 cents a week (from 2020), perhaps rising to $2 a week by 2030, "not even enough to buy a hamburger".
The policy received a cautious acceptance from energy and industry leaders, but big questions still remained. As a matter of priorities, Australia’s emissions target seemed to stroll in as “an optional extra” behind the twin mastheads of reliability and affordability[5]. And there were also suggestions that a default carbon price was an inevitable outcome of the new arrangements because buried in the new Energy Security Board’s advice was a mechanism to be added to the National Energy Market in two stages in 2019 and 2020 which recognised the fact that some electricity retailers would not be able to meet the required emissions profile, while others would overachieve.
Under this scenario, underachieving retailers would be able to buy an as yet undetermined portion of any National Energy Shortfall using Australian carbon credits (ACCUs) or international units[6], but the Energy Security Board denied that carbon was being priced under the scheme: What was being priced, they said was reliability, and the ability for the mechanism to be dispatched[7]. However, the real question was whether this new policy or framework, call it what you will, would meet the approval of State Government leaders at the then forthcoming COAG meeting in August 2018.
As it turned out, it didn’t. The Labor states, Victoria and Queensland plus the ACT, said it didn’t go far enough on the aspect of reducing emissions, but the Liberal party room said it went too far, and all references to emissions were removed in a revised NEG draft issued by the Prime Minister, who was deposed in the immediate aftermath of these events, and the Energy Minister.
[1] This summary from Peter Hartcher, “Bright sparks leave Abbott in dark”, SMH 21-22 Oct 2017, 32.
[2] Jacqueline Maley and Nick O’Malley, “Power Point”, SMH 21-22 October 2017.
[3] Peter Martin, SMH, 18 October 2017.
[4] Hartcher, op Cit.
[5] Peter Hannam, SMH, 18 October 2017.
[6] Peter Hannam, SMH, 19 October 2017.
[7] Peter Hannam and James Massola, Brisbane Times, 19, 20 October 2017.