Will the NEG restore energy policy balance?

Facts and data on energy policy are difficult to come by.

We’re finally starting to see some figures around the Prime Ministers proposed solution to our energy crisis.

The two recent articles below, by SkyNews Business, are tracking the story around the National Energy Guarantee, or NEG.

Statements by the Prime Minister seem to be pointing us toward improved reliability and affordability:

‘Of course renewables have a big future, of course they do, but you’ve got to do it in a smart way.

‘Are we seriously going to de-industrialise Australia because of some green left ideological crusade for wind farms and solar panels?’

And comments by BlueScope CEO Paul O’Malley, who notes the threat to international competitiveness from soaring costs, convey an understanding of technical issues so often lost on extreme green advocates:

‘[The NEG is the] only transition plan in 10 years that addresses the need for reliable and affordable energy’.

‘If we saw a $20/MWh drop in our power price, we’d be $14M better off each year instead of a $50M increase’.

‘I’m concerned. We can’t rely entirely on solar, wind or battery. They don’t have the capability to underpin the economy. We need a certain mix of base load energy [and] renewables, but I’m pleased with the NEG policy’

So, what is the NEG?

Before we jump into a quick synopsis, let’s be clear about what the NEG is trying to address.

We face an energy policy trilemma: Reliability – Affordability – Emissions Intensity.

Take a look at the below diagram.

 

 

We can’t achieve all three equally from any one power generation source at present. There needs to be a balance.

Wind and solar achieve zero CO2 emissions, but on their own aren’t reliable of affordable. They aren’t reliable because they aren’t dispatchable. When the wind doesn’t blow and the sun doesn’t shine, they require additional expenditure on battery storage or back up gas generation.

With that in mind, let’s return to the proposed NEG.

According to the PM’s media release:

The Guarantee is made up of two parts that will require energy retailers across the National Electricity Market to deliver reliable and lower emissions generation each year.

  • A reliability guarantee will be set to deliver the right level of dispatchable energy (from ready-to-use sources such as coal, gas, pumped hydro and batteries) needed in each state. It will be set by the Australian Energy Market Commission (AEMC) and Australian Energy Market Operator (AEMO).
  • An emissions guarantee will be set to contribute to Australia’s international commitments. The level of the guarantee will be determined by the Commonwealth and enforced by the Australian Energy Regulator (AER).

Past energy plans have subsidised some industries, punished others and slugged consumers. The Turnbull Government will take a different approach.

The National Energy Guarantee will lower electricity prices, make the system more reliable, encourage the right investment and reduce emissions without subsidies, taxes or trading schemes. It is truly technology-neutral, offering a future for investment in whatever technology the market needs – solar, wind, coal, gas, batteries or pumped storage.

Unlike previous approaches, we are not picking winners, we are levelling the playing field. Coal, gas, hydro and biomass will be rewarded for their dispatchability while wind, solar and hydro will be recognised as lower emissions technologies but will no longer be subsidised.

We think this is a step toward restoring affordability and reliability. Though the devil is always in the detail (modelling assumptions), so we’ll need to keep an eye on the NEG as it’s fleshed out between now and next April.

Read more…

 

Energy plan to slash $120 off power bills

Sky News | Wednesday 22 November 2017

New modelling shows households could save $120 a year on their power bills under the govt’s energy plan.

Source: Energy plan to slash $120 off power bills

 

NEG to be finalised in April: PM

Sky News | Monday 27 November 2017

‘By the time you (the COAG Energy Council) meet in April we expect to have the national energy guarantee fully fleshed out,’ Mr Turnbull told reporters.

Source: NEG to be finalised in April: PM