rss
29

Why Turnbull’s plan could be disaster for renewables, climate, prices

Print Friendly
20171017001320612015-minihighres

(AAP Image/Mick Tsikas)

On the face of it a twin-pronged system focusing on reliability and environmental outcomes could have appeal. But we just don’t know because the details of Malcolm Turnbull’s National Energy Guarantee (NEG), and even the basics of how it will work, have not been explained.

As one clean energy advocate said on Tuesday: “We’re still trying to understand whether we love or hate the NEG”. Part of that hesitation is based around the oft-made assumption that it might be better to have something, rather than nothing. But that remains to be seen.

The mainstream media certainly embraced it, but analysts see red flags all over the place – it is potentially bad news for renewables, bad news for emissions, and bad news for prices. It is potentially Turnbull’s energy trilemma turned upside down.

Most of all, the proposal appears to be the most ill-considered, poorly detailed and potentially useless policy that anyone can remember – the work of Australia’s so-called “energy mafia” hungry to defend the power of the incumbent oligopoly, commercial interests and their ideology.

Here’s a list of reasons why people should be concerned.

Did anyone tell the Coalition party room that this is a de-facto carbon price?

Energy analysts say it is a little early to tell, because there are no actual details, but it looks variously like a emissions intensity scheme, which Turnbull has been pushing for in various forms since 2008, or a mix of a baseline and credit scheme and a capacity market.

Market analysts Reputex describe it is a de-facto carbon price. “The attributes of the NEG will, in effect, establish a de-facto price on greenhouse gas emissions from the power sector, and provide a robust source of demand for Australian Carbon Credit Units (ACCU),” it says.

Little wonder, then, that Tony Abbott is not impressed. “Tony is a conscientious objector,” says energy minister Josh Frydenberg. But he’ll apparently hold his tongue for the moment.

But this carbon price will be invisible

Not only will it be a de-facto carbon price, it will also be invisible,  because the “market” will be hidden by the complexity of energy price caps and hedges. That is a major concern.

There is absolutely no transparency in this market, which is why the big gen-tailers are in favour of it, because it hands them absolute control and discretion over the market and investments.

The scheme will, ostensibly, be monitored by the same useless regulators that allowed the networks – and latterly the generators and retailers – to gouge consumers over the last 10 years, and enabled them, more recently, to “play” the market for certificates in the renewable energy target.

It’s hardly reassuring for the consumer. The power of the energy oligopoly is simply reinforced.

The emissions target are manifestly inadequate

The emissions reduction target that the ESB was asked to work with – a 26 per cent cut in electricity emissions from 2005 levels by 2030 – is manifestly inadequate, for even Australia’s current climate commitment (it loads a lot of effort on to other sectors), but also to the ultimate goal of capping global warming well below 2°C.

Even Origin Energy recognises this, noting the cavernous gap between the Paris target and the current emissions trajectory, a trajectory made worse by the government’s hint that any emissions targets will be “back-ended” to 2030.

But as with Finkel, the low target might be deliberate, so as not to scare the horses and the climate deniers. (Note the IPA came out again on Tuesday and argued for no emission cuts).

Had Finkel couched his review in terms of what needed to be done, like the Climate Change Authority, his conclusion would likely have been a renewables share approaching 70 per cent by 2030, not the 42 per cent in his document.

And those emissions targets may have been largely met, already

The big question is how much new investment the scheme will pull in. Not a lot. That’s because, as David Leitch tells us, the current build-out of renewables under the renewable energy target, and the closure of the Hazelwood power station has already got the country much of the way there.

Leitch says that, on his numbers, only around 4,000MW of new large-scale renewables would be required between 2020 and 2030 to meet the current emissions target. That’s not much. The scheme would only work if there were serious reduction targets. And he doesn’t hold out much hope of that, in the current political environment.

Worse, he notes of Snowy 2.0: “(The government) is funding a very expensive project designed to supply a reliability rule that they have expressly forced onto retailers. In essence it is making a rule that requires retailers to buy the output from its own project. The mafia would approve.”

01.-12-10-13-AGL-Wind-Farms-309-1024x683

It could mean zero additions to large-scale renewables

Even Leitch’s analysis could be optimistic. The advice from the ESB suggests a range of 28-36 per cent renewables by 2030, and 18-24 per cent wind and solar share. This estimate includes rooftop solar, according to ESB chair Kerry Schott.

Given the anticipated, and one would suspect, unstoppable uptake of rooftop solar by households and businesses in response to high power prices that are not coming down, it means that at the bottom end of their range, the ESB is predicting virtually no new wind and solar projects in the country between 2020 and 2030.

And given that anticipated surge in rooftop solar, even the top end of the forecast allows for little in the way of new renewables, which seems extraordinary given the recognition by Schott and even the Coalition about the falling cost of wind and solar.

Fancy investing in a Peru landfill gas mine rather than an Australia wind farm?

The market component even has an international flavour. The advice from the ESB includes the possibility of retailers meeting their environmental obligations through international credits.

That likely means that rather than investing in an Australian wind or solar farm, the likes of Origin, AGL and EnergyAustralia could invest in a third-world project that generates cheap credits – like the Peruvian landfill gas plant and other facilities supported by the UN’s Clean Development Mechanism that small retailer PowerShop invests in so it can claim to be “carbon neutral”.

And it may not lead to investment certainty

Many are defending the NEG on the basis that any sort of policy is better than nothing. That reminds us of Turnbull’s last major achievement, the bastardisation of the CPRS before he was rolled by Abbott in 2009.

Morgan Stanley’s Rob Koh notes that, on the detail presented so far, the government will set emissions reductions pathway (rather than that being done by an independent body).

“The risk of political interference in the targets may reduce investor confidence in the scheme, particularly where there is no explicit linkage to Australia’s Paris Agreement commitments,” Koh writes. And because no one else has done this sort of scheme, it will inevitably have to be fine-tuned.

The price cuts are trivial, so consumers will find own way with solar and storage

The promised price reductions of around $100 a year have not been modelled, may be as low as 50c a week, and may just be a figment of Pierce’s imagination. It just hasn’t been modelled. Given the absurdly high price of electricity in Australia and the competing forces of rooftop solar and storage, that offers nothing to consumers.

“Regardless of what Turnbull and his mates decide, shaving between $25-$100 off someone’s bill is meaningless compared to the difference that behind the meter PV, storage and demand management can make,” says Adrian Merrick from EnergyLocals.

“While they focus on gaining votes from policy headlines, we’re quietly making the change a reality.” Tomorrow, on One Step Off The Grid, another example will be published of how consumers will do this.

What does it mean for the states?

No one is too sure. The Labor states have targets ranging from 40 per cent by 2025 (Victoria), to 50 per cent by 2030 (Queensland and the NT) and 100% by 2020 (ACT). South Australia is already at more than 50 per cent.

But after what has been described as a testy phone hook-up between Frydenberg and the state ministers, the states say they have been gobsmacked by the lack of detail, and the apparent back-flip by the Coalition, who having once damned the states for “going it alone” now want them to do the heavy lifting.

The Coalition needs state approval for the changes, because they involve alterations to the market rules.

A victory for the energy mafia?

This is the question everyone is asking. An eight-page letter with no detail and some fuzzy ideas, ostensibly from the Energy Security Board, comprising two new independent directors (Schott and Clare Savage) and the heads of AEMO, AEMC and the AER.

This is the sort of scheme that the energy oligopoly and their attendants in various consultancies and think tanks (some call them the energy mafia) have been busting to do for years. See our first point about the lack of transparency in the markets and the control by the incumbents.

And all fingers are pointing to John Pierce, the head of the AEMC, the rule-maker that has fought so hard against renewable targets, and rule changes, and has been a staunch defender of fossil fuel markets.

He appears to have seized an opportunity, with impeccable timing, and was clearly joined by key players in the major utilities who have been quick to give their imprimatur. There is a body of opinion in the energy market that Pierce has outflanked his rivals and peers.

It was noticeable that Turnbull deflected to Pierce during the various briefing – indeed, Turnbull has been using the heads of the various agencies as some sort of human shield to deflect attacks, defending the policy’s expediency through their “expertise”.

Schott further added to this view of the role of Pierce, suggesting it was the culmination of a “year of work”. But the ESB only met for the first time a month ago. And the only member of the ESB “around for years” is Pierce.

And the states found it passing strange that the ESB, which is supposed to be part of COAG, had made no approach to the states. “There are real questions about the process,” said ACT minister Shane Rattenbury.

Schott’s quick change on renewables

The fact that the heads of the other agencies were willing to put their names on such a vague document has surprised many in the industry, particularly in the case of Schott, admired for being a no-nonsence administrator.

Here, Schott has signed her name to a document apparently condemning renewables to zero or limited growth in the next decade. Yet it was just a few months ago that Schott was chair of Transgrid, a major transmission company that said decarbonising the grid with a very high penetration of renewables was not only doable within a few decades, but would also lower prices.

See this story Transgrid: 100% renewables is feasible and affordable. That’s not the story that the ESB is telling us now. What do they know that the boffins at the networks and the CSIRO do not?

Is AEMO confusing the role of system security and dispatchability?

The role of AEMO is also curious. On Tuesday at the behest of the prime minister, AEMO CEO Audrey Zibelman talked about the recent interventions by AEMO into the South Australia market, which included limiting the amount of wind if not enough gas generation was present.

But this immediately raised questions about what these interventions – largely about the level of “fault current” – have got to do with dispatchability and the recommendations of the ESB. The CEC’s policy wonk, Tom Butler, tweeted this after the Tuesday press conference:

There is normally plenty of dispatchable generation in South Australia, it’s just that the plant operators have to be given a boot up the backside by the market operator to switch them on. System security is one thing, dispatchability is another. It is not clear how the NEG would address that.

We asked AEMO and were advised to talk to the ESB. But, we said, the ESB is just the heads of the agencies, of which AEMO is one. Finally we got a reply:

“The NEG provides the opportunity to signal what the system requires to ensure reliability. AEMO has been consistent in its position that we require a portfolio of resources that meet all the objectives (such as frequency, inertia, voltage control etc) to maintain power system security and reliability.”

They suggested we talk to Schott. But Schott’s office said that wasn’t possible until next week at the earliest.

Twitter @gilesparkinson

  

Share this:

  • Chris Drongers

    Be the first! Alter market rules so that I can buy the biggest battery my smsf will allow and then let me park myself between rooftop pv systems and a customer.

  • hugh grant

    Good points Giles.

    Turnbull has played all three ESB Members like a fiddle. I expect that all three of them will regret signing that letter when the details of the Coalition’s plan unfold.

    The ESB members have no responsibility and no real interest in Australia’s emissions reduction targets – which are considered an “externality” by the NEM. I expect that their engagement with Labor and other parties will uncover the key sticking point of the Coalition’s NEG – it naively assumes that they will seamlessly reach bipartisan support on Australia’s emissions reductions trajectory and contribution of the power sector to Australia’s emissions reductions effort. The Coalition is assuming a 26% reduction by 2030, whereas meeting Australia’s Paris commitments in the most cost effective manner would involve power sector emissions reductions of around 70% by 2030.

    • Chris Drongers

      “most cost effective manner would involve power sector emissions reductions of around 70% by 2030.”

      Is that correct?

      Consider transport emissions. About 30% of Australia’s CO2 but we have some of the slackest engine efficiency standards in the developed world. Just upping new motor vehicle emission standards to European norms would reduce our transport emissions by about 30% and overall emissions by up to 10%.

      Also industrial process efficiencies and building efficiency for commercial and domestic structures. Again European building efficiency standards would drastically reduce the 30% of energy consumption here – zero or negative net emission buildings are coming in Europe.

      Then there are all the urban planning issues around sprawl.

      The lack of high level attention and facilitation for inclusion of these energy uses in Australia’s energy arguments points to the lack of will by our rulers in the face of the interests of the energy suppliers.

      • hugh grant

        Yes Chris – the CCA’s consistent advice was that achieving Australia’s emissions reductions commitments in the most cost effective manner would involve the power sector delivering emissions reductions of 63-77%.

        • Chris Drongers

          Seems like echoes of pink batts. Expenditure on pink batts shows up as an expense, the subsequent savings on heating and cooling bills aren’t as easy to document. The savings can be significant as the British are showing by including building insulation upgrades in their environmental plan just released.

          Let’s see the numbers for expense vs savings for upgrading cars and buildings as part of the normal change over. That way, the cost of a carbon efficient car is not the $50,000 purchase price, it is the difference between the $50,000 fuel efficient car and the $35,000 run-of-the-mill car, both adjusted for lifetime fuel costs. Add in environmental costs if desired.

  • Hettie

    This so called plan makes no sense at all.
    Unless, of course, you are a coal baron, a power generator with substantial fossil fuel powered plant, or a major shareholder of either of both types of entity.
    And utterly indifferent to both the survival of the planet and the plight of Australian consumers.
    Why do they have to make everything so complicated?
    To try to conceal the inherent corruption of the rule makers is my best guess.
    We might be able to take comfort in the notion that this very strange bird can’t possibly fly. The states are unlikely to accept it. ALP and Greens will sink it in the Senate, and it will be back to square one.
    In the meantime, installation of domestic pv panels continues apace, and may yet be the saviour of us all.

    • Tom

      “Unless, of course, you are a coal baron, a power generator with substantial fossil fuel powered plant, or a major shareholder of either of both types of entity.”

      Or if you’re on the payroll of these bodies.

      • Hettie

        Silly me. Fancy forgetting the employees.
        Although, to be fair, in this time of job insecurity and scarcity, working for the bastards is no guarantee of agreeing with their ethical (!) position.

        • Tom

          Sorry – I meant the politicians that are on the payroll.

          • Hettie

            You are right, of course. Thought I had included them with the corrupt rule makers. 😃

  • Patrick Comerford

    Like poor old finkle Zibelman has been shown to be out of her depth when it comes to playing politics with conservatives in Australia. Finkles reputation has been severely tarnished and he has bought it on himself. Zibelman well she’s new in town and is entitled to be given the benefit of the doubt on this one. But she needs to watch her step she’s playing in the shark tank now.

    • Ren Stimpy

      Crap! She knows a frig of a lot more than you and me combined and then some! You idiot.

    • Ren Stimpy

      You communist cunt. We are onto you, you Russian fake news cunt.

    • Ren Stimpy

      Do you copy/paste this shit? You stupid idiot.

  • Robert Westinghouse

    Great article. LNP cannot be trusted. It all plays into the hands of BIG Power. It will not reduce costs to consumers. As I have said before (if we all tell the politicians): 1. Increase subsidiaries on PV; Increase subsidiaries on Batteries; Increase Feed-in Tariffs; then tell BIG Energy to suck it up princess and give power back to the people… Perhaps I am a dreamer, but if Tumble gets his way it will be a nightmare….

    • phred01

      grid desertions is just beginning…just waiting for cost effective batteries

      • Robert Westinghouse

        Yes grid defection will occur. Prices of batteries will fall, but will electricity rise faster than the fall. I bought my batteries in June (just before the 23% increase in power prices) so I got lucky…If you have any room on the mortgage go for it…I have Sonnen who offer a far better guarantee then Tesla (but Elon Musk is sexy man)…

  • Peter G

    Tom Butler has it in one. Security is being dishonestly conflated with dispatchability. Question time was depressingly full of this nonsense – it almost does not matter what the detail turns out to be – the political play is what on show.

  • phred01

    Mal Turncoat must be sick of doing the Captain’s jig. The puppet strings from the back bench will get tangled next may when the Captain will force a spill (drafted by the ultra right)

  • Hettie

    Here’s an idea.
    You know those security deposits the miners have to pay to cover site remediation?
    What if they bore some close resemblance to the actual costs of remediation?
    What if they had to be supplemented every year to cover cost increases?
    What if worked out sections of a mine had to be remediated progressively?
    No excuses. Cleanup as you go or face savage penalties. Pay up or face serious jail time for all senior executives and Board members.
    What would happen to the price of coal then?

    Yes, I know it’s not going to happen under this government, but as a means of removing one of the hidden subsidies that coal enjoys it seems to have some promise.

    • MaxG

      Or even simpler; remove coal direct subsidies and externalities paid form the public purse, e.g. pollution, health costs, railway, etc.

      • Hettie

        Those too, Max. It was those hidden subsidies I was thinking of, and although those sodding great holes in the ground are not exactly hidden, the fact that there is barely any money on deposit to restore the landscape is not well known. Besides, compliance with a requirement that they be progressively rehabilitated is more easily verified than measuring the health care costs and other items you mention.😑

        • Mike Westerman

          Hettie – those big holes are worse than your average disused mine as well: Kidston and Kanmantoo show other mines can be repurposed to support RE thru pumped hydro, whereas the big hole at Hazelwood will be a fire, groundwater and subsidence hazard for many, many years, and hence an ongoing drain on the public purse.

          • Hettie

            True indeed. All the more reason to make the miners clean up their own mess. Hazelwood especially, although now the French owners have shut up shop it might be a tad difficult to persuade them to do so.
            Certainly some but not all can be repurposed for pumped hydro, or inclined rail inertia braking, since the grid is right there, but again, the miners pay.

  • Jeremy C

    Why the suprise? In Australia’s ‘mates’ economy guaranteed profit via a rentier stream is sacrosant to be protected at all costs. Its what Turnbull has been taught all his life and the dilemma for him has been how to protect this while protect himself from the rabid deniers in his party and this policy is the method to achieve the former.

    Australia has two big problems: the embedded ‘mates’ economy and the embedded fanatical deniers, nothing will change till these two things are disposed of.

    • MaxG

      Spot on… 🙂

  • Hettie

    Looking at other comments on this article and others in the Guardian and on Facebook, I see the old furphy about the Greens being to blame for blocking Rudd’s diabolically stupid Carbon Pollution Reduction Scheme.
    Please Giles, anyone, will you publish a proper critique of that dog of a bastardised policy, showing just why it was so dreadful, and why killing it to make way for the Gillard Carbon Price was the right thing to do.
    Of course, Abbott……
    But the good people out there need to be reminded that the CPRS would have locked in huge subsidies to the biggest polluters for decades, would have given a carbon price of about a dollar a tonne, and generally blocked improvement far into the future.
    There is a lot of false belief out there. Time to tell the truth.

  • I will reserve judgement until the numerous flaws are known, that is, once they are extrapolated from the details of how it will actually work. Good faith in this matter is not appropriate.

    • Mike Westerman

      You have to love this mob tho: they’ve done the equivalent of presenting an empty blackboard, and claiming they’ve resolved the clash between General and Special Relativity! Of course there should be rules requiring generators to have maximum limits to average emissions, minimum levels of dispatchable power and preventing gouging thru excessive market power. It’s bleeding obvious that the current market hasn’t and can’t deliver on these things. Turnbull has once again illustrated he thinks problems are solved by 3 letter acronyms – see the NBN mess.