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COAG agrees to put wind and solar sectors in no-man’s land

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COAG energy ministers agreed on Friday to commission more design work on the Turnbull government’s proposed National Energy Guarantee, forcing the renewable energy industries in Australia into a new era of policy uncertainty.

The decision was expected, given that Queensland could not vote due to its state election tomorrow, the Liberal governments in NSW and Tasmania would always support it, and Victoria earlier this week declared itself open to finding out more about the plan.

This left South Australia and the ACT in the minority in their opposition to the NEG – or, as federal energy minister Josh Frydenberg put it in a press conference in Hobart this afternoon, they “they had their say today, and they lost.”

Still, the federal government was forced to abandon its original tactic of asking the states to actually approve of the NEG, instead merely seeking consensus on doing further work.

The Energy Security Board will now do this work, returning with more ideas in April about how a new emissions obligation and a reliability obligation might work; how it can avoid reinforcing the power of the incumbent generators, and if it is scaleable.

Final design proposals may not be presented until the second half the 2018. Agreement then, will require the support of all states. By that time, South Australia will have gone to the polls, Victoria will be in election mode or have voted, and Canberra may also be winding up for a federal poll.

The decision means that renewable energy sector, and the nascent energy storage industry, will face at least another year of policy uncertainty, with only the state-based targets and lingering high prices driving new investment as the renewable energy target is already nearly met.

Queensland’s 400MW renewable and storage tender is dependent on the result of Saturday’s poll, the results of Victoria’s 650MW renewable energy auction will not be known until next July, while the Northern Territory is expected to announce the details of its renewable energy plan next week.

The only factors driving new projects are the soaring prices in wholesale markets and the growing corporate off-take market, as big companies look to slash their energy bills through contracts with wind and solar projects.

The reaction to the ESB’s updated modelling has been scathing, with experts noting that it achieves little more than “business as usual.”

The modelling, as revealed exclusively by RenewEconomy on Wednesday, admits that it may not achieve any more emissions reductions than doing nothing; may not invite any new investment in wind and solar or storage of note; and any bill reductions for consumers will largely be driven by wind and solar installed under the RET.

Screen Shot 2017-11-23 at 2.25.13 PM

Analysis from Bloomberg New Energy Finance supports this, saying it would “decimate” new investment in the wind and solar industry.

On BNEF estimates, the NEG under current emission reduction targets will actually cause a reduction in the amount of renewable energy (particularly wind energy) over business as usual, and an increase in the amount of coal generation. (See graph above).

However, if the Coalition aimed for a 45 per cent emission reduction target – as recommended by the Climate Change Authority to meet the Paris requirements, but rejected outright by the Coalition’s right wing – then the amount of solar may increase four-fold, mostly at the expense of coal.

In a separate analysis, Reputex said that under the NEG, and the Coalition’s current emissions reduction trajectory, net zero emissions in the Australian electricity sector may not be reached until between 2095 and 2101. (See chart below).

Most analysts say that to meet the Paris treaty, this global target needs to be met before 2050. (See chart below).

28% NEG target copy

The consensus agreement at COAG was reached after South Australia and the ACT found themselves outvoted by NSW, Victoria and Tasmania.

NSW and Victoria are shareholders, along with the federal government, in Snowy Hydro, the company that would build and own the huge Snowy Hydro 2 pumped hydro project, which appears to be the big winner from the NEG.

Tasmania was told just before the meeting that it would get $20 million from the federal government to do further studies on the proposed new Basslink that the government would like to build to become a “clean energy battery” for Victoria, also supported the move,

South Australia and the ACT also failed in their attempts to force the Energy Security Board to model the NEG against the policies that the Coalition has previously rejected, Alan Finkel’s Clean Energy Target and the emissions intensity scheme.

“Why is Australia holding back. What is it that they are afraid of,” South Australia energy minister Tom Koutsantonis said.

“What’s clear from the Energy Security Board’s report into the NEG is that it stifles investment in renewables, keep dying, uneconomic coal power stations alive longer, and enriches the generators with the most market power.

“South Australia and the ACT are at the cutting edge of energy technology … we want more solar thermal, not less. We want more pumped hydro, not less. We want more wind and solar.”

Koutsantonis said South Australia would commission its own modelling of alternative policies.

“If you truly believed the NEG was the best option to drive down power prices, why wouldn’t you agree for it to be compared against other mechanisms? The answer is that the NEG is in truth the third best option. That simply isn’t enough and can’t be supported by South Australia.

“To proceed the NEG would require unanimous support at COAG, so this policy is either years away, or won’t happen at all.”

But Frydenberg either isn’t fazed by this, or isn’t looking that for forward.

“South Australia and the ACT took a stand, and they were defeated. The COAG energy council rejected their bid, the message from that is that the Commonwealth and the other states see the NEG as the only game in town,” he said.

“We didn’t seek today to make the NEG a reality,” he added. “This process has some way to run. It has to be considered, it has to be careful, it has to be undertaken by the experts and that’s what we’ll do.

“What we are now doing, following the release of the modelling,  following the agreement today, is to undertake design discussions with the key stakeholders.”

Frydenberg issued a media statement saying that the NEG and “new investments” would deliver bill reductions of  $400 a year to households, but the modelling makes clear that most of this is the result of the RET that the Coalition sought to stop.

The Victoria government, which has its own 40 per cent renewable energy policy, but also three major brown coal generators, was criticised by the Greens for its support of the NEG.

“(Premier) Daniel Andrews has betrayed renewables by backing in the coal-huggers at COAG. He has sold his soul to coal,” climate spokesman Adam Bandt said in a statement.

“Despite knowing that the NEG will strangle investment in renewables and prop up dirty coal, Andrews has shown his true colours and capitulated at the last minute.

“Andrews should have joined with Greens climate Minister Shane Rattenbury in the ACT and the SA government who wanted to explore a policy that might actually work,” he said.

However, state energy minister Lily D’Ambrosio said Victoria had raised its concerns, would not approve the policy unless they were addressed, and had succeeded in forcing the ESB to report to the COAG council as a whole, rather than being “run roughshod” by the commonwealth.

“At the end of day – if the information comes back, and the National Energy Guarantee does not stack up, that will be the end of it,” she told RenewEconomy.

Clean Energy Council CEO  Kane Thornton said the most important issue is whether the NEG can ultimately deliver new renewable energy investment that is crucial to reduce power prices.

“The clean energy industry will only support the NEG policy if it is designed and implemented in a way that ensures strong and sustained investment in renewable energy and energy storage,” he said in a statement.

“A lot of analysis and work is now required to fill in the detail necessary to fully assess the policy and its potential. This will determine whether it is capable of delivering this new investment and able to secure support from the clean energy sector.”  

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  • Joe

    The Frydenberg…there really are no words after his spray at SA and ACT, “….they had their say today, and they lost”, “South Australia and the ACT took a stand and were defeated”. It tells us all the mindset of the dude. He is always about the politk. Doing a fair dinkum job in the role of Environment and Energy Minister is not at the front of his thinking, not when he keep delivering public sprays at the progressive Labor jurisdictions in SA and ACT. The dude is a disgrace and he should just resign. Then he can focus his efforts at home…perhaps install those solar panels?????

  • howardpatr

    This little article is a good summary of the pathetic national “policy” coming from Turnbull and Frydenberg:-

    https://cleantechnica.com/2017/11/23/national-ambition-vital-australias-renewable-energy-industry-turnbull-government-failing/

  • Colin Edwards

    Turnbull and Frydenberg still captive to the far right of the COALition.

  • Robert Westinghouse

    Common sense and science defeated by egos and BIG power. This means that the States MUST separate from the Feds and do their own thing. The country is too big and too diverse to be dictated by fools and idiots who are in the pockets of Big Business…. what about Liu Xiuaodong’s 40K donation to the LNP…. greasing the wheels of business…not getting my vote!!! Viva la batterie!!! Viva la PV!!!

    • Jolly Roger

      Yes but how ? Perhaps this could be addressed in the podcast ? That is, with so many states and now the NT with ambitious renewable targets, how will that play out over the next two years now ? With Victoria supporting the NEG isnt that at odds with their renewable target ? Or if the NEG doesnt matter, how so ?

      • Robert Westinghouse

        All good comments. It is a conversation we should have. This is just another nail in the coffin: like the states fighting for their GST and
        their income tax. It seems (not a political historian) that the Fed’s have a different agenda and the states cannot agree…so why not separate. As one journo said, “Queensland is too large and diverse to be represented by only 1 party” …. well seems like this is applicable to the states.

    • Joe

      Big Mal was on hand with a thank you lunch for the $40 large donation…all hot on the heels of Barnaby collecting his $40 large ‘performance bonus’ from very, very good friend Gina last Tuesday in Canberra. Corruption is alive and well in the Great State of QLD. Mr Fitzgerald…where are you?

  • RobertO

    Hi All, This is the outcome I fear the most. We were better off BAU and RE would sneak in, but this cans RE until COALitian are gone.

  • Rebecca

    Let’s hope Labor gets back in Q.L.D it looks hopeful. Nothing changed with the LNP yes another $40 donation to the LNP from an overseas company. This party again shows contempt for Australians.

    • Joe

      Hello young Rebecca. Yes $40,000 is indeed the magic number this week. First it was Gina and Bananabee and now China and LNP both with their ‘incentive bonus’ payments. China is just matching what ‘local’ Gina put on the table, Anyway else want to…raise?

      • Rebecca

        Joe apparently in chinese news paper, chinese are against the use of tax payers money being used for Adani.

  • Grpfast

    Frydenberg is like having a bully in the room. He is a disgrace to his portfolio and to the future of Australia. Stacked deck in voting and it’s time the states went their own way. Labor states showing some concern for their citizens (except VIC which sits on the fence).

  • solarguy

    Frydturd isn’t fazed because this garbage is a stalling tactic only and we all know it. And what jungle weed is Andrews smoking, agreeing to this waste of time and money, what a bloody fool.

    Beam me up Scotty, no f..ken brains here!

  • Ken Dyer

    Unfortunately, there will not be any substantive change until the coalition is voted out at the next election, and the Liberal party stooges appointed as commissioners to the AEMC by Tony Abbott are replaced at about the same time. Until then, Australia will just go backwards with renewable energy.
    But when finally we have a new government in 2019 and the deadwood at the AEMC are cleaned out at about the same time, Australia will then have a real chance to catch up with the rest of the World, and contribute to battling climate change.

    • wideEyedPupil

      So lets hope this legislation to support a NEG doesn’t get enacted during this federal term. Turnbull is on the nose, Abbot a spent force as PM and Julie Bishop (who led efforts by DFAT to undermine the last couple of COP talks) the only Federal LP front bencher with a profile who isn’t deeply loathed by many swing voters (and don’t worry, she’s waiting for the right moment to pounce!).

  • JIm

    Real decisions deferred. Comments from Frydenberg are spin.

  • Sally Noel Triggell

    Looks like Victoria has voted for yet more delays and confusion, and that will only lead to higher electricity prices and more damage to our planet. Just when we think we are heading in the right direction some bumbling idiot does this.

  • mick

    ok we stood up time to get out of howards f— up

  • Peter F

    I believe that under the NEG generators who fail to despatch contracted levels of power for any reason including lack of gas or boiler tube leaks will have to pay the spot price to replace it. If you owned a certain coal station that has a 46% forced outage rate would you bid anything into the market knowing that if something goes wrong you will not only fail to receive $90 or $200 but you will pay anything up to $14,000. Seems to me batteries and pumped hydro plants are going to be in high demand, and once they are built what is the cheapest way of recharging them. It ain’t coal or gas

    • mick

      unfortunately i think qld labor would have backed vic nsw and the lnp

    • wideEyedPupil

      Impact Investor Group and Bloomberg Finance don’t seem to agree with that assessment, The devil lives in the detail, which has yet to be committed to paper.

    • RobertO

      Hi Peter F, Under the NEG the COALition will rule that coal is “Baseload” hence it will be exempt. The NEG is aimed at stopping RE as much as possible. John Perice is known for his support at all costs of coal, delay as much as possible, protect as much as possible.

  • john

    Report back to the CEO ” Mission accomplished Sir, policy uncertainty was the outcome , this should stifle any new investment in substantial sized Renewable Energy Projects”
    It worked a treat last time and same plan different name will do the same again, just keep having reports that kick the can down the road and the end result is a stall in any developments that are of any size.
    The political spin of course will be along the lines of ” If Renewable Energy can compete why are they not building?”
    The inference of course being that RE can not compete, therefore this base load power is the answer, so lets put over a billion dollars into that.

  • Ken Fabian

    I thought before the NEG was sprung on everyone that Turnbull’s LNP would choose delay over firm policy – after it was sprung I’m not sure I was wrong.

    Only policy that addresses the transition to low emissions head on can be firm policy; anything that dodges the climate and emissions issues will be open to ongoing, legitimate criticism and change. The NEG has winding back that transition built into it’s “fossil fuel reliability before renewables emissions reductions” rhetoric as well it’s foundations as questionable working assumptions that aren’t much questioned by the policy makers themselves. What I think it aims for, politically, is to take advantage of the desperation for some kind of clear policy by State governments, most of which are brim full of climate science deniers and coal and gas spruikers anyway, to put in place something, anything, that looks half workable, but that kicks the climate and emissions can further down the road.

  • Robert Comerford

    Pathetic, this NEG thought bubble should have been rejected entirely. Only SA and ACT come out of this with any credibility. Victoria…..are they closet LNP supporters?
    What race is d*ckh**d ?? ….. might be answered in Qld today.

  • neroden

    The corporate takeoff market is monumental.

    It’s obvious what a household should do: go off the grid. It’s also obvious what an industrial or commerical site should do: go off the grid. This is just going to keep happening until the federal government stops supporting the market maniupulators and the fossil fuel generators.