BNEF: Turnbull’s NEG akin to joining gym and not lifting weights

Leading independent research firm Bloomberg New Energy Finance has issued a damming appraisal of the Coalition’s proposed National Energy Guarantee, saying it was akin to signing up to a gym membership, but not lifting any weights.

A day before the COAG energy minister are due to meet to decide whether to approve further work on the NEG, BNEF said the policy would do little under current emission reduction settings, and only slow down the development of renewable energy.

“The level of ambition on the emissions reduction target is key,” say analysts Kobad Bhavnagri and Leonard Quong.

“The NEG could be an effective and innovative policy mechanism, but if the target is weak, it will deliver little. It would be like finally having the gumption to join the gym, but then not lifting any weights when you get there.”

The analysis follows the release of modelling prepared by the Energy Security Board ahead of the COAG meeting, which revealed that a NEG may not achieve any more reductions than doing nothing, would stop new renewable development, and would largely rely on the renewable energy target for bill reductions.

BNEF completed its own modelling, also showing that a NEG at current targets would add little to business as usual, or doing nothing.

BNEF’s assessment is embarrassing to the Turnbull government, which had cited BNEF’s initial description of the NEG being a potentially “elegant” solution as a key sign of support.

But that assessment also included numerous concerns about the policy, and these appear not to have eased after considering the more detailed modelling.

In fact, BNEF’s assumed share of renewables has been wound down, with more coal generation likely to occur under the NEG than otherwise.

“(The NEG) could be an effective mechanism, that innovatively helps Australia address the challenges of the energy trilemma,” the BNEF analysts write.

“But the outlook for renewable energy depends squarely on the ambition of the emission reduction target.

“The government’s current 28% below 2005 levels by 2030 CO2 target would slow the current pace of renewable installations and emissions reduction in the National Electricity Market (NEM) and requires little effort to achieve.

“Existing policies should deliver a 23% reduction by 2020, and small-scale solar PV uptake should do most of the heavy lifting thereafter, bringing renewable generation to 39%.

“But only 1.5GW of new large-scale renewables will be required from 2021-30 to meet this Emissions Guarantee target, which is not consistent with the long-term emissions reduction goals of the States in the NEM, nor the broader aims of the Paris Agreement.”

The BNEF analysts noted that a 45% emissions reduction target by 2030 – as proposed by the Climate Change Authority – would require 17.3GW of large-scale renewables in the next decade, and lift renewable generation to 52%.

“This target would be consistent with the long-term net-zero emissions goals of New South Wales, Victoria, Queensland, South Australia, Tasmania and the ACT, and is the policy platform of the federal Labor Party.”

However, BNEF did says that the Reliability Guarantee is unlikely to give windfall gains to coal, but only if it is designed to ensure there is enough dispatchable capacity only.

But it could prevent further coal closures under a deeper emissions reduction target, ensuring the system remains stable whilst reducing emissions and coal burn. Its analysis shows under a low target, the amount of coal generation would increase under a NEG.

BNEF’s analysis comes after a group of executives and academics published full page advertisements in the media calling for ambition to be scaled up, regardless of the merits or otherwise of the NEG policy mechanism.

Another group of environment and community groups called on energy ministers heading to COAG to reject the NEG in its current form, saying it did nothing for the clean energy industry and would only consolidate the market power of coal and gas generators.