The independent Energy Security Board (ESB) has released the first public consultation paper for the National Energy Guarantee (NEG) which provides a framework to deliver more reliable, affordable and cleaner energy to Australian consumers.
The NEG consultation paper focuses on the key issues raised by the Finkel review: the need to improve system reliability, cut power prices, and reduce emissions.
ESB Chairman, Dr Kerry Schott AO, said, “It’s an obligation on retailers to do two things – to make sure the energy they are purchasing meets emissions reduction targets for the electricity sector and to meet dispatchability requirements in each region.
“The National Energy Guarantee would integrate energy and climate change policy for the first time. This will give investors the much needed certainty they have been lacking over the last decade.
“Under the proposed mechanism, energy sector development could continue confidently with emissions and reliability objectives implemented in lockstep under the rules.”
Dr Schott said the guarantee produces a clear investment signal so the cleanest, cheapest and most reliable generation gets built in the right place at the right time.
ESB is implementing the COAG Energy Council’s mandate to deliver a lower emissions, reliable power system with enough electricity available when needed, at the lowest possible price.
“While the Federal Government will set the emission target itself, we need stakeholder inputs on how contracting and compliance associated with meeting annual electricity emissions targets will work in practice,” Dr Schott said.
The Australian Energy Council (AEC) said the release of the National Energy Guarantee (NEG) discussion paper is an important step towards achieving a workable energy and carbon policy framework for the energy industry.
AEC Chief Executive, Matthew Warren, said, “The discussion paper provides important options to deliver reliability and emissions reductions as we transform the electricity sector.
“Importantly the paper retains the existing market designs and contracting arrangements. This will enhance the NEG’s ability to deliver new investment to lower emissions without compromising reliability.”
Mr Warren said the ESB has correctly identified that the central benefit of getting the NEG settings right is that they will provide much-needed certainty for market participants so they can make long-term investment decisions.
The Australian Petroleum Production and Exploration Association (APPEA) has also commented on the paper saying the NEG is an ambitious plan to balance cutting emissions with delivering affordable and secure energy, and that gas will play an important part in this.
APPEA Chief Executive, Dr Malcolm Roberts, said, “Gas-fired generation provides the on-call energy to maintain a reliable electricity grid. International studies show that the increasing penetration of intermittent renewable energy into grids requires support from on-call energy sources such as gas and pumped hydro.
“Open and transparent engagement with all stakeholders is vital to developing the design of the NEG.”
Energy Networks Australia said ESB’s approach aims to bring together Australia’s climate and energy policy in one overarching approach that is mindful of both emissions and reliability.
Energy Networks Australia CEO, Andrew Dillon, said Australia’s energy solution can only be achieved through a collaborative, nation-wide approach.
“This is not a state-by-state issue but a national concern and we all need to work together, with inclusive, integrated policies that can deliver.”
Luke Menzel, CEO of the Energy Efficiency Council, said the paper fleshed out some of the detail on how the NEG could work, including a strong focus on using demand response to improve the reliability of the energy system.
“This is a genuine opportunity to find some common ground on the future of our energy system. We call on all governments to work together on the NEG,” Mr Menzel said.
“However, it must be complemented with aggressive action on energy efficiency to improve energy affordability for businesses and households.”
Clean Energy Council Chief Executive, Kane Thornton, said the consultation paper presented a good opportunity to commence serious consultation and design of the policy.
“While investment has been booming recently behind the 2020 Renewable Energy Target, the lack of a coherent and bipartisan national policy puts further growth in doubt over the long term. The consultation paper has begun to provide some much-needed policy detail and we will work through it in depth over the coming days,” Mr Thornton said.
“Our industry’s broad position on the NEG remains the same. We are open-minded about its potential but many questions remain, including the fundamental question about whether the policy signals will be able to underpin new investment in clean energy and address issues with market concentration.”
Meanwhile, the Smart Energy Council (SEC) has voiced very deep concerns about the National Energy Guarantee.
SEC said initial indications are that it could be very damaging for investment in residential, commercial and large-scale solar, storage and renewable energy.
The release of this paper is the first step in a consultation process that will occur over coming months. The ESB will provide a draft high-level design to the COAG Energy Council in early April 2018, ahead of the COAG meeting later that month where ministers will consider the report.