NEG will probably win

According to Giles Parkinson at RenewEconomy, energy minister Josh Frydenberg has written to the Energy Security Board (ESB) to make sure they stay focussed on the task at hand. He has asked them “to restrict its modelling to only one specified short term target, and then assume emissions would “flatline” after that.”

Parkinson says:

    The intention of the order is clear: If the ESB were to factor in a long term target that matched the over-riding goal of the Paris climate treaty (keeping global warming well below 2°C), it would no doubt produce a document for the rapid decarbonisation of Australia’s grid.

Obviously we can’t have any of that nonsense to distract us!

Parkinson says that the ESB letter proposing the National Energy Guarantee, which was delivered on 13 October was in answer to a letter from Frydenberg on 3 October, and then was accepted on the same day.


The Oz now cites modelling which the government has and won’t share claiming that the extra costs of renewables would be $200 a year, compared to the claimed $100 cut from the NEG, which of course has not yet been modelled.

Labor’s Mark Butler reminded us that most modelling, from the CSIRO, AEMC and others, showed that an EIS would be up to $15 billion lower over the course of the next decade.

    Garnaut, the eminent economist who spent considerably longer than 10 days producing the Garnaut Review, said that the Jacobs modelling cited by the Coalition and The Australian actually showed prices falling by a large amount under the Emissions Intensity Scheme, and more under the Clean Energy Target.”

Labor has, of course, dumped the EIS in order to end the climate wars by accepting Finkel’s CET.

The Business Council of Australia has now written offering itself as a “broker” to negotiations between the Coalition and the Labor Opposition. This sent Richard di Natale right off, saying the BCA is part of the problem.

It won’t happen, of course, Labor would never accept their help, being perfectly capable of negotiating on their own, if the government will in fact engage. Usually the Turnbull government restricts itself making loud and public demands without showing Labor the details.

However things are looking a bit cosy, with the BCA being headed by Grant King, former CEO of Origin, and the deputy chair of the ESB, Clare Savage, being the former policy chief of the BCA, and the Government getting answers to complex problems in almost no time at all.

As I’ve said elsewhere, federal Labor doesn’t actually have to agree with anything except the 26% emissions target, which they won’t.

This week’s Essential Poll is interesting in this regard. There is only mild comfort for Labor.

The NEG was approved by 35% of respondents and disapproved by 18%. However the big winner was ‘Don’t know’ with 47%.

As to the government’s plan to phase out subsidies to renewables after 2020, 32% approved, 41% disapproved and 28% said they didn’t know.

When asked whether the Government’s energy plan would reduce or increase power prices or would it make no difference, 31% said it would make no difference, 31% thought prices would go up, 16% said they would go down and 22% didn’t know.

People were asked six questions about which party out of the LNP and Labor would perform better on clean energy matters, Labor was ahead on four and equal on two. However, we are talking numbers mostly in the 20s. 34 to 39% said there would be no difference and 14 to 16% didn’t know.

If there is only mild comfort for Labor there is less for the LNP. Probably the election will be won elsewhere.

Ben Potter in the AFR (pay-walled) says the Labor states are leaving the door open to the National Energy Guarantee.

I heard Jackie Trad on talkback the other day. She said Labor would do what they were going to do irrespective of what Canberra did. She pointed out that the Newman government had destroyed any skerrick of state initiative on climate. However, the Palaszczuk government now had $5 billion worth of clean energy projects underway, in the pipeline or in prospect.

It seems the states will grumble a lot, and with good reason, but will probably use the cover of the price reduction to accept, hoping that Labor will win the election and raise the target. Labor could also initiate adjusting the regulated standard for ‘dispatchable’ electricity if it proves to be too onerous. Potter says that in any case this may be a pre-condition which enables the states to agree.

The NEG has significant support from the Clean Energy Council industry lobby, Bloomberg New Energy Finance, and some renewable energy generators, including Meridian Energy Australia and Infigen Energy.

Quite frankly, South Australia, Queensland, Victoria, and the ACT have shown what can be done with reverse auctions and state investment. Queensland has been told that with the NEG its renewables target of 50% by 2030 might cost up to $900 million dollars over a decade. I don’t know what the revenue in the electricity system is, but the scale can be judged by this graph of the value of transmission assets from the ACCC prices and affordability report:

Queensland comes in at over $25 billion dollars. Profits based on return on equity in Queensland go to the government, not to private corporations, some of them foreign. In this context, $900 million over ten years is chicken feed.

The advantage of running with the NEG is that business would have the certainty it keeps calling for, so they can reduce the risk premium in lending for investment.

Accepting the NEG is not ideal, but we have heard before about the perfect being the enemy of the good. Back in 2009 the Greens rejected the CPRS largely because it would see coal persisting into the 2030s. It is now clear that politics will need to wake up in fright and see climate change as the existential threat it actually is before we realise that fossil fuels, which made the modern industrial world, will also destroy it unless we take rapid action.

9 thoughts on “NEG will probably win”

  1. I knew it was there but I forgot to read Parkinson’s post on 30 reasons to question the NEG before posting.

    A lot of this will come out in the wash before the states sign up, which is why we needed 200 pages rather than eight.

    I reckon a core issue is what counts as ‘dispatchable’ power, and a core issue here is ‘synchronous’ power:

    13. Whether synchronous generation will be specifically required: This will be key for technologies like batteries. The South Australia government came up with a similar scheme called the energy security target. It defined the “security” as “synchronous” only. It was told that this did not reflect modern technology views, would favour gas over batteries, and would reinforce power of incumbents and send prices higher. It dropped the idea.

    AEMO seems to be demanding ‘synchronous’ power in a way that SA did not have before the big blackout, and whether it was ‘synchronous’ or not became a big issue in Chris Uhlmann’s mind, reporting for the ABC.

    Seems the expert advice differs, and it’s what I referred to the other day about regulators being ‘captured’ by particular experts.

    It’s outside my own expertise by a country mile, but what I’m hearing about the emphasis being given to the issue sets off alarm bells.

  2. Seems the expert advice differs, and it’s what I referred to the other day about regulators being ‘captured’ by particular experts.

    Not surprised at all Brian, I am currently reading Game of Mates – how favours bleed the nation by Cameron Murray and Paul Frijters, and so far agree with Paul Gittens’ review of it that it is not good news , but you need to know it.

    The systemic rot of evolving door lobbying in Canberra are perhaps the biggest economic inefficiency or threat to our economic future of our nation. More power to Jaqui Lambe for pursuing this sordid issue.

  3. Brian,

    AEMO seems to be demanding ‘synchronous’ power in a way that SA did not have before the big blackout, and whether it was ‘synchronous’ or not became a big issue in Chris Uhlmann’s mind, reporting for the ABC.

    As I commented elsewhere in another thread last week:

    Existing coal generation will be retired one-by-one as each power station reaches its use-by date, so coal-fired power at short run marginal cost of about $20/MWh or less will nearly all be disappearing within 2 decades, and some big ones within a decade – Liddell, Vales Point, Yallourn W, and Gladstone.

    A graph from yesterday’s REneweconomy article compares how long various types of technologies of new electricity generation take to construct.

    New gas (low) is the quickest to build for fossil fuelled generators at 3-6 years, with coal (low) taking 6-9 years, and others taking significantly longer.

    Solar-thermal is the only ‘synchronous’ power that can be built in less than 4 years, with (what I would call) ‘synthetic synchronous’ power from battery storage being the quickest in under a year.

    There’s no mention of pumped-hydro, but according to this article, Snowy 2.0 is likely to take 4-5 years to construct, if it gets the go-ahead.

    My point is new coal-fired generation just takes too long to build, and new gas-fired generation is becoming uncompetitive with renewables and isn’t any quicker to build.

    And then there’s this pesky requirement to reduce carbon emissions to net zero by 2050.

  4. Thanks, Ootz and Geoff M.

    Giles Parkinson today says NEG has claimed its first victim because:

    Deutsche Bank said they had slashed the value of Tilt Renewables by around 15 per cent, mostly because the market ascribes no value to its development pipeline of more than 1650MW of wind and solar projects, which now have much less chance of seeing the light of day.

    With ESB insisting on firmed renewables, projects on the drawing board that are purely wind or solar are likely to be cancelled or will become more expensive because firming will need to be added. There was a suggestion in the AFR article that the ESB would give a bit on this point.

    Parkinson suggests that the purpose of NEG is to stop the development of large scale wind and solar in their tracks.

    At present the unfirmed wind and solar is effectively firmed by cranking up coal and turning on the gas, with demand response starting to play a role.

    From what Parkinson says, Weatherill is in no mood to come to the party, and is asking some awkward questions.

    The ESB would like to get the new deal approved by COAG in November. There seems no chance of that unless major concessions are made to Weatherill.

    The SA election is on 17 March. When it is in caretaker mode SA can’t approve. Qld has an election either before or after the Commonwealth games, which are 4-15 April, unless Palaszczuk goes in the next couple of days, which I think she won’t.

    It all looks messy.

  5. I think Turnbull’s apparent win will be very short lived as Climate Change is occurring far too quickly now. The conservatives have succeeded in destroying any move to a coordinated national balanced renewable energy infrastructure model, but I am confident that any grid model will be difficult to hold together in the future with the type of government we must live with.

    It does not come as a surprise to me as quite some years ago it became clear that distributed energy would win out in the medium term. To that end I see the pieces falling into place and once they are available as a complete installable hardware set at a reliably stable and uniform price there will be a massive roll out which will change the nature of Australian energy production in a disruptive way as this price will be no more than the cost of two high end laptops and two cellphones (items we enthusiastically buy and scrap every four years.

    I came across this informative piece while browsing. of particular interest was a linked item in my comment which refers to state tip levies which for NSW it claims is around $133 per tonne. Think carbon tax here and what a hew and cry Abbott bleated out over $20 for coal. What I am seeing here is a massive incentive to install cellulosic waste to methane conversion facilities for local councils of sufficient size (town gas again, only clean).

  6. Today at REneweconomy, Giles Parkinson’s article headlined China does not need any new coal fired generation, is basically saying what I heard Tim Buckley say back on February 22 in Sydney at the Senate inquiry into the retirement of coal-fired power stations. There’s more specific detail highlighted in today’s piece, but finally at last there’s some media attention on this issue.

    And yet earlier this year I recall hearing various commentators and politicians were saying China is building hundreds of new HELE coal-fired power stations, and Australia isn’t building any.

    A quote from Winston Churchill seems appropriate:

    “A lie gets halfway around the world before the truth has a chance to get its pants on.”

  7. Mr j, I totally agree with your assessment of Turnbull’s NEG. Truely not surprising given the situation he is in.

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