The introduction of the emissions reduction target for the National Energy Guarantee to Parliament has been delayed indefinitely in favour of “extreme intervention” to drive down power bills. But stable energy policy and lower emissions could be a surer route to lower prices.
This week, after months of policy design and public consultation, the emissions reduction target component of the National Energy Guarantee (NEG) has been put on hold in the wake of the Liberal Party’s leadership crisis.
In the past few days, Prime Minister Malcolm Turnbull first announced that he would remove the emissions reduction target from the legislation in favour of a regulated target, then reverted to a legislated target, but delayed its introduction to Parliament until there was “sufficient support” in the House of Representatives and the Coalition party room.
On Monday, Turnbull also announced measures to drive prices down, including a default offer they claim could save residential customers between $183 and $416 per year.
According to Deputy Chair of Engineers Australia’s Environmental College Lara Harland, this shift shows a “total lack of understanding” of climate change risks and the prices the renewable energy industry can deliver.
“Unfortunately there is also a lack of comprehension that three-quarters of Australians want leadership and stronger action on climate change,” she added.
On Monday, Turnbull said he still planned to ask the states to “press on” with the reliability component of the legislation.
The Chair of Engineers Australia’s Electrical College Mark Lendich said the electricity market is complex, and changing the pricing structure would require discussion papers, consultation and feedback.
“That’s a long, drawn-out process,” Lendich said.
He explained that customers’ bills from retailers are made up of a number of parts including regulated elements such as network and market charges, and non-regulated elements such as wholesale prices.
“Unless the impact on all of these is understood, there could be perverse outcomes,” Lendich said.
The business community, which has been supportive of the NEG, has reacted negatively to this week’s price-cutting initiatives.
“We support lower prices but this will not be achieved by ad hoc and extreme intervention in the electricity market,” said Business Council of Australia Chief Executive Jennifer Westacott.
Australians acting on emissions “from the ground up”
Harland said a regulated emissions reduction target would be preferable to the proposed 26 per cent legislated target, as it would be easier to increase if the government changes at the next election.
She added that the 26 per cent target is likely to be met with existing state renewable energy targets whether the NEG is passed or not, although there is debate among supporters of emissions policy about whether the NEG is better than nothing.
With rooftop solar installations at a record high, Harland said emission reduction is “coming from the ground up”.
“With the price of solar and batteries decreasing rapidly, people will take control and continue to install the power themselves,” she explained.
The recently announced $1.24 billion Victorian state government initiative to subsidise residential solar panels will be an incentive for this trend to continue.
Reliability policy still under development
The Energy Security Board is seeking public comment on changes to the ‘final’ design documents considered by the Council of Australian Governments (COAG) Energy Council earlier this month.
These changes include options to address the concern that reliability gaps might emerge during the 10-year forecast period for electricity supply, in spite of the three-year notice the Finkel Review recommended power stations be required to give before closure. This recommendation was recently drafted as an electricity market rule.
Other measures under consideration are requiring another trigger one year before closure to ensure that contracts were in place for the remaining year (down to the last five minutes of trade), or increasing the notice period to five years.
Lendich emphasised the need for clarity on energy policy, in particular how the various components (reliability, emissions and cost) fit together, as well as the governance around them including the many ongoing policy and regulatory reviews.
He hoped the efforts made to develop the NEG were not cast aside due to political wrangling.
“One would hope that all this work will not be lost,” Lendich said.