And how the world turns. Do-nothing Malcolm has pulled a rabbit out of his hat or, rather, a lump of coal, with an ingenious new policy, via The Australian:
Energy retailers will be forced to buy a minimum amount of baseload power from coal, gas or hydro for every megawatt of renewable energy under a drastic intervention into the energy market by the Turnbull government to drive energy bills down by $115 a year.
Malcolm Turnbull and Energy Minister Josh Frydenberg will today announce a “national energy guarantee” as the centrepiece of an energy plan that will end new taxpayer subsidies for renewable energy from 2020 and impose a 0.2 per cent reliability regulation on retailers to inoculate the system from blackouts and give a lifeline to coal power.
It is understood that under the new plan there will be a reliability guarantee and a separate emissions guarantee that will force retailers to buy a minimum amount of dispatchable power to reliably deliver baseload supply, effectively ending the flooding of intermittent power, from sources such as solar and wind, onto the market.
The rules will be imposed on a regional basis depending on the existing sources of energy, meaning states such as South Australia, which relies heavily on wind power, would be required to buy more, whereas coal-heavy states such as Queensland would be required to buy less.
A senior government source confirmed that the policy signed off by cabinet last night and to be taken to the Coalition partyroom today, is estimated to cut retail energy bills of between $100 and $115 a year.
Subsidies for new renewable energy supplies would also end with the Renewable Energy Target’s expiration in 2020. As expected the government will not adopt the recommendation by Chief Scientist Alan Finkel to replace it with a Clean Energy Target.
This is a Large-scale Renewable Energy Target only for fossil fuels. How it is supposed to drive down the cost of power is not clear. So let’s just say so! From the AFR:
Under laws to be set by either regulation or legislation, any retailer selling power will be bound by guidelines ensuring reliability and emissions reduction.
The former will favour coal and gas, at least in the short term until the reliability of renewables improves, while the latter will favour renewable energy.
It will be up to each energy retailer to decide what mix of power they source to meet both mandated criteria.
There will be no subsidies or certificates of any kind, such as a CET which effectively subsidises cleaner fuels. Nor will there be any tax or a price on carbon, or trading in a domestic market.
Politically, the policy is of critical importance to the Turnbull government.
Of course there is a subsidy. It is a marketshare guarantee for coal and gas generation when both are more expensive than renewables:
The subsidy is coming directly from households and businesses who will pay the higher prices for power as a result.
Nobody is going to install more coal power but the Coal Energy Target will slow the roll out of storage technologies, as well as ensure that overpriced gas remains the marginal price setter in the National Electricity Market (NEM) for longer, recalling that it is gas that sets the marginal cost of wholesale power in the national electricity market, see Australian Energy Market Operator description below:
If you believe the Government’s rhetoric then the subsidy will deliver greater grid reliability but it will definitely be more expensive in the process.
But the Government is lying. At current rates of advancement within five years renewables plus storage – which will grow to dominate baseload power – will be cheaper than both coal and gas:
But instead of investing in these for the future, via a Clean Energy Target, generators will now be forced to maintain obsolete coal and gas plants, guaranteeing mis-allocated capital that the consumer will pay for. Even more whacky, it now operates in direct contradiction with ongoing state-based RETs and soon to be Clean Energy Targets.
This is political chicanery meets ideological lunacy meets economic perversity on a grand scale.
