Following on from the release of the Federal Government’s new national energy policy, public debate is now focusing on whether the National Energy Guarantee (NEG) is the best strategy for Australia’s energy future.

The government has decided not to adopt a Clean Energy Target (CET), which was recommended by Australia’s Chief Scientist Alan Finkel in his final report of the Independent Review into the Future Security of the National Electricity Market.

The government previously agreed to implement 49 of the 50 recommendation by Dr Finkel to improve reliability and affordability of the national energy market, but decided to sign off on its new plan, which replaces the Clean Energy Target with a National Energy Guarantee, a recommendation of the Energy Security Board (ESB).

“The Energy Security Board has recommended a way to deliver lower power prices and more reliable power supply as well as helping Australia meet its international commitments,” Prime Minister Malcolm Turnbull said.

The CET would have mandated that a certain percentage of power be generated from gas and renewable energy. Under the new policy, renewable energy will make up 40 per cent of the nation’s power mix by 2030.

Dr Finkel released a statement on the Australian Government’s energy announcement, stating that the National Energy Guarantee appears to be a credible mechanism and that he was pleased that the Australian Government asked the Energy Security Board to provide advice on the matter.

“The electricity review that I chaired proposed an orderly transition (Recommendation 3.2) to achieve the key outcomes of increasing security and reliability, affordability and lowering emissions,” Dr Finkel said.

“The Energy Security Board was one of the key recommendations from our review. Consisting of the energy market regulators and an independent Chair and Deputy Chair, it is the country’s most authoritative voice in energy matters.”

The orderly transition proposed in the review consisted of three parts:

  • An agreement by Commonwealth, state and territory governments to an emissions reduction trajectory for the National Electricity Market.

  • A credible mechanism to enable the regulators to ensure that new low emissions energy enters the market. By comparing a number of mechanisms the review concluded that the Clean Energy Target mechanism was preferred. However, other mechanisms could be used by the regulators to achieve the same goal. A requirement that entry of new low emissions generation should occur in the context of a Generator Reliability Obligation for new generators (Recommendation 3.3).

A divisive plan

Labor, the Greens and some industry bodies have criticised the scheme, questioning the suggested savings for households and attacking the NEG as an attempt to halt renewable energy investment in Australia.

Chief Executive of the Australian Solar Council, John Grimes, says the new scheme will increase the cost of renewable energy projects.

A paper and expert analysis released from the Climate Council states, “While limited information is currently available, the details available indicate the National Energy Guarantee (NEG) supports the continued reliance of Australia’s aging coal and gas power stations, while also restricting the uptake of new renewable energy such as solar and wind.”

The Climate Council’s report further states, “The NEG has the potential to hold Australia back, increasing the potential for our country to fall further behind the rest of the world, as other nations transition to clean, affordable and renewable energy and storage technology.”

The National Farmers’ Federation said they will reserve judgement and wait to examine the detail of the plan’s effectiveness for meeting the needs of the farm sector.

Federal Minister for the Environment and Energy, Josh Frydenberg, says that the NEG guarantee builds on the existing energy policy but unlike previous approaches, levels the playing field.

“It is truly technology-neutral, offering a future for investment in whatever technology the market needs – solar, wind, coal, gas, batteries or pumped storage,” Mr Frydenberg said.

“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.”

Interim CEO of Energy Networks Australia, Andrew Dillon, has also commented on the plan and said the focus on reliability and security in the new NEG was welcomed by Energy Networks Australia, but policy stability is essential if Australia is to see downward pressure on energy bills.

“While the Government’s commitments to target reliability and system security are important, any policy can only succeed if it can garner a broad political commitment that lasts beyond a single election cycle,” Mr Dillon said.

“The measures announced today will need careful review, but stable energy and carbon policy will help meet the grid modernisation challenge, keep the lights on and make power bills more affordable.

The Government will now work with the ESB and the states through COAG to implement the National Energy Guarantee.

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