Josh Frydenberg to seek NEG nod by April, final design settled by end of 2018.

Source: DailyClimate

Peter Hannam

Josh Frydenberg, the federal environment and energy minister, will appeal to state and territory counterparts to support the government’s National Energy Guarantee by next April so that necessary legislation and rule changes can be made by the end of next year.

According to the agenda of Friday’s COAG Energy Council meeting, obtained by Fairfax Media, Mr Frydenberg has dropped his earlier intention to ask for in-principle support for the NEG at the Hobart gathering.

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Instead, he will seek approval from ministers for the Energy Security Board to undertake more analysis of the plan aimed at “guaranteeing” a reduction in carbon emissions from the electricity sector while bolstering its reliability.

The reliability component should be implemented by “no later than 2019” and the emissions element by the following year.

Mr Frydenberg will propose a timetable that includes the ESB releasing a design paper by February. It will then hold a public forum later that month, and would take written submissions until mid-March, the agenda paper shows.

The Energy Council ministers would then meet in April to approve “the policy approach”. Final design would proceed with the aim to have all necessary rule changes and new legislation passed by the end of 2018.

One senior official due to attend Friday’s meeting said the ambition of the gathering had been scaled back after fierce objections from several states. “Essentially, we’ll agree to keep talking,” the official said.

Various states have raised issues with the NEG, not least its weak ambition.

Emissions ambitions will have a big impact on the likely energy mix in Australia. Emissions ambitions will have a big impact on the likely energy mix in Australia. Photo: Carla Gottgens

By setting a goal of reducing emissions from the electricity sector only in line with Australia’s Paris commitment – cutting 2005 levels by 26-28 per cent by 2030 – the Turnbull government will have to find more costly reductions elsewhere in the economy, analysts have said.

States and territories are also wary that the NEG will limit their own renewable energy targets, which are already legislated in some regions.

Victorian dairy farmer Lindsay Anderson, also an exporter of solar power back to the grid. Victorian dairy farmer Lindsay Anderson, also an exporter of solar power back to the grid. Photo: Paul Jeffers


The leak of the Hobart agenda comes as the NEG was assessed by respected industry analysis group, Bloomberg New Energy Finance as likely to “decimate” new investment in large-scale renewable energy because of its weak proposed emissions reduction goal for 2030.

Labor’s plan to cut national emissions by 45 per cent on 2005 levels, by contrast, would extend the current boom in the industry, BNEF said.

Renewable energy would see little large-scale investment under the NEG, Bloomberg NEF says. Renewable energy would see little large-scale investment under the NEG, Bloomberg NEF says. Photo: Supplied

The consultancy said the government’s setting for the NEG would result in just 1.5 gigawatts of new wind and solar farms being built in the 2021-30 decade.

Rooftop solar photovoltaics, though, would continue to grow, adding 12 GW of new capacity. New gas-fired power of some 4.9 GW would make up for most of the 6 GW of aging coal plants expected to close.

“The [NEG] mechanism looks like it could be very effective, but if the target is weak, it will deliver little,” Kobad Bhavnagri, BNEF’s head of Australia, said.

“It would be like finally having the gumption to join the gym, but then not lifting any weights when you get there.”

By contrast, Labor’s emissions pledge if applied to the electricity sector would trigger construction of 17.3 GW of large-scale renewable energy during the decade after 2021, BNEF’s modelling showed.

The electricity sector is widely considered to be among the industries that should lead emissions abatement mostly because low- or zero-carbon technology substitutes are already available and relatively competitive. 

Labor’s 45 per cent overall emissions reduction target, for instance, “would continue the current pace of reductions from existing policies”, BNEF said. (See Bloomberg chart below.)


‘More affordable’

State and territory energy ministers, particularly from Labor-run regions, are likely to challenge Mr Frydenberg over the ambition and impact of the proposed NEG that will require their approval to proceed.

Friday’s meeting is unlikely to produce much progress not least because Queensland will be represented by an official ahead of the state’s elections on the following day.

Mr Frydenberg told Fairfax Media the NEG would deliver “more affordable and reliable energy as we transition to a lower emissions future”, including more renewable energy.

“Labor’s plan of a 45 per cent emissions target will drive up energy prices and lead to a less reliable system,” he said.

Mark Butler, Labor’s climate spokesman, said BNEF’s analysis “confirms that the Turnbull government’s NEG will strangle renewable energy”, and backed the ALP’s plan.

“Under the government’s NEG modelling, the renewable energy mix is only expected to reach 36 per cent by 2030,” he said. “This translates to only a 0.5 per cent increase in renewables above already committed investment every year over the 2020s – or little more than 250 MW per year over the decade.”

‘Secretly developed’

Leading environmental groups, meanwhile, called for a revision of the NEG to aim for a higher target, stating that in its current form, more carbon pollution and less clean energy will be produced by the power industry than if the Turnbull government did nothing.

The groups, including the Australian Conservation Foundation and Solar Citizens, met South Australian Premier Jay Weatherill – one of the most outspoken critics of the NEG – on Thursday.

“The NEG has been hastily and secretly developed without the input of state and territory ministers to appease Malcolm Turnbull’s climate-denying right flank,” Paul Oosting, GetUp’s national director, said. 

“It fails to deliver serious action to reduce climate pollution in Australia’s energy sector.”

Questions remain

Along with the emissions “guarantee”, the NEG is also intended to bolster reliability of the electricity sector to cope with aging plant and also the integration of more intermittent electricity supplies.

Bloomberg noted key aspects of the reliability guarantee remain unclear, such as whether so-called synchronous generation will be specifically required of electricity retailers, or whether contracts would be based on rated capacity or actual generation.

Alan Pears, an energy expert at RMIT University, said the government’s modelling suggests a major cutback in the ambitions being set by the states and territories.

Victoria, for instance, would build only 742 megawatts of new renewable energy under the modelling presented compared with 650 MW it has already issued bids for. 

“This would make Victoria much more dependent on interstate supply and I suspect that would not be politically acceptable,” Mr Pears said.