Via the AFR:
Australia’s largest energy companies have warned there are serious flaws in the Turnbull government’s National Energy Guarantee which needs to be overhauled before it is signed off by state and territory ministers next month.
With federal Energy Minister Josh Frydenberg pushing to deliver the NEG as one of the Coalition’s key political achievements this year, big energy retailers have urged the Energy Security Board – which is finalising details – to keep the design simple or it will risk distorting financial markets and push up prices.
Energy Australia executive Mark Collette said the NEG should be putting the emissions guarantee on generators, rather than retailers. He said an emissions guarantee on retailers would be onerous and threaten liquidity in the financial markets.
Since nobody knows what it is, how can they complain about it? Still, this is the objection that I hear most. The fear is that the NEG will hamper the wholesale electricity market, one of the few components of the National Electricity Market (NEM) that actually works.
This is all politics all of the time. The Coalition’s troglodyte rump won’t support the NEG and neither will Labor states unless something changes. For good reason. What’s the point of policy certainty that derails the decarbonisation project, via Energetics:
The NEG has two broad ‘requirements’; an emissions requirement and a reliability requirement. While these may deliver lower emissions and a more reliable electricity system there’s no guarantee that they will do so in the most cost-effective way.
The emissions requirement may be set too low to be of any use, but imposes significant compliance costs and complexity.
The ESB’s consultation paper notes that the Commonwealth Government supports a target for electricity emissions of 26% below 2005 levels by 2030, matching the national target. However, as is widely known the ALP has a more ambitious national target (of 45% by 2030) achieving the government’s national target really needs greater emissions reductions in electricity (because sectors like agriculture are unable to match the national rate of reduction, and decarbonisation of electricity is required to reduce emissions through electrification of sectors like transport and parts of industry) moreover the proposed exemption of electricity consumed by emissions intensive trade exposed industries (EITEs) means that EITEs could potentially contract directly with cheap high carbon generation while other energy users cross-subsidise their electricity emissions the impetus of a pro-rata target of 26% is so little that such an emissions target would probably lag rather than drive investment. We find that even without a NEG this level of emissions reduction would be achieved. If, as the consultation paper canvasses, carbon offsets from outside the market also become eligible to count towards the emissions target, it would drive even less change than business as usual.
With no effective investment signal the emissions requirement is pointless, except to the extent that once it exists it’s easier for future governments to ratchet it up. This means a weak emissions requirement does nothing to reduce policy uncertainty. At the same time, the administrative demands of complying with the emissions target are onerous and extremely complicated. Most electricity contracts do not specify the source or emissions intensity of the contracted electricity, and so the consultation paper has set out a range of methods of trying to work this out, as well as proposing the AER establish a registry of electricity contracts so that it can stitch together emissions, generation and retail contracts.
As well, once past 2030, the NEG demands five years notice on any changes to the emissions intensity target meaning ratcheting up decarbonistion becomes impossible over the political cycle just as the global decarbonsation project is likely to demand it.
In short, the Do-nothing Energy Guarantee:
- remains a mystery, is incredibly complex and threatens to destabilse the only thing that does work in the NEM, the wholesale market;
- will likely entrench the gas cartel that is the real cause of the all the problems;
- does nothing to solve outages;
- will retard decarbonisation now and even more into the future;
- will keep prices high, and
- is unnecessary when all we need is a little more gas.
Meanwhile, Liar Frydenberg is at it again:
Energy Minister Josh Frydenberg said yesterday wholesale energy prices should come down over the next two years and put electricity retailers on notice to pass on the savings to consumers “in full”.
Mr Frydenberg said the government would be closely watching the major retailers — such as AGL, Origin Energy and Energy Australia — to ensure they reduced their charges in line with the expected lower wholesale costs.
The warning comes as analysis of the ASX forward market shows wholesale electricity contracts in NSW have fallen by 28 per cent since March last year to $77 per megawatt hour, while they have dropped by 28 per cent in Queensland since April last year to $70 per MWh.
The Government can claim some success in driving down gas prices via its moral suasion with the gas cartel though its refusal to enact its own gas reservation mechanism has prevented much larger falls. Even so, these price falls are not enough to reduce bills. The previous average price was $30MWh. Owing to the lagged nature of bulk contracts we’re still seeing the pass-through of yesteryear’s price rises as contracts expire.
Therefore expect this to continue, via The Australian:
The Clean Energy Regulator has released figures showing that more than 1057 megawatts of capacity was installed last year, equating to 3.5 million solar panels being fixed to rooftops.
Industry analysis obtained by The Australian reveals the cost of small-scale technology certificates — created to increase the incentive to install rooftop solar — shows the value of the subsidies was $500 million last year.
The solar industry is expecting the subsidy to increase to about $1.3bn this year after the regulator estimated in January that 22 million new certificates would be created over the year.
That’s one thing Liar Frydenberg can rightly take credit for: a prepper boom.
