The modelling to be released to support the National Energy Guarantee will show that the Energy Security Board assumes that the construction of wind and solar projects will come to a complete standstill from 2022 due to the government’s low emissions reduction target.
The modelling, to be released along with further details of the NEG design on Thursday, should not come as a surprise to the Labor states that are being asked to support the controversial policy in the name of “policy certainty” for the energy industry.
The final decisions paper circulated to state energy ministers a week ago assumed a complete standstill in new wind and solar from 2020/21, when the renewable energy target was met, and initial auctions from the Victoria and Queensland government were completed.
That argument – although disputed by many who point to the ongoing state based targets and corporate demand for cheaper renewables – was used to try to convince the states to sign up to the NEG next Friday.
The full modelling does not show a much improved picture.
Only about 1,000MW of large-scale wind and solar is assumed to be built to meet the Coalition government’s 26 per cent reduction in electricity sector emissions by 2030.
“Agreement to implement the Guarantee will underpin the continued confidence in the market and is expected to result in the further commitment of 1,000MW of renewable generation relative to the no policy scenario,” the 67-page document says.
Apart from that, there will be no new large-scale wind or solar, just about a 5 per cent increase in contracting.
The document also says that coal power will account for more than 60 per cent of all generation by 2030, and no extra coal closures will occur that do not occur under the “no policy” scenario.
This is in sharp contrast to the modelling released by the Australian Energy market Operator in its Integrated System Plan, which assumes 46 per cent share of renewables by 2030 in its neutral scenario, and 61 per cent in its fast track scenario.
Most other private analysis puts renewables at well above 40 per cent share by 2030, thanks to increased corporate demand for wind and solar, the ongoing boom in rooftop solar, and the Victoria and Queensland targets, which the ESB deliberately ignores.
The lack of new investment is also the result of the ESB’s assessment that the weak reduction target will effectively be met by the RET, and any leftover target will be quickly met by the lucky projects out of the huge pipeline that is building.
After that, the signal for new investment from emissions reduction is gone. And because the ESB modelling assumes a big fall in wholesale electricity prices, and no retirements of coal generators other than Liddell much before 2030, there will be no economic signal for new generation, apart from rooftop solar.
To be sure, there will be a whole range of reasons why that modelling will be challenged – along with the assumptions requested by the ESB that underline it – and widely dismissed.
The modelling has been controversial from the time that the ESB design was first unveiled last year. Then, the modelling failed to take into account rooftop solar, and appeared to assume that there would be less wind and solar built than business as usual.
Modelling is always guided by the assumptions and the agenda behind it.
But, if the modelling is the key factor in trying to convince the Labor states that having a NEG is better than not having a NEG, it is hardly credible.
Still, it’s considered necessary to get the policy past the Coalition party room, which does not want to see any signal for new renewable investment. They will be told that they will get their wish, even if they don’t get a new coal-fired power station.
All in all, it’s a bit of a farce, with so much pretence about the true nature of the NEG and what it is trying to hide – that it will have an effective price on emissions, and that energy transition is a phenomenon that should be embraced, rather than repelled.
Indeed, increasing numbers of the renewable energy are now saying that a no-NEG landscape is more attractive than having one.
RenewEconomy sought confirmation from the ESB about the modelling, but its emails and phone calls were not returned before publication.
Giles Parkinson is founder and editor of RenewEconomy.com.au, and is also the founder of OneStepOffTheGrid.com.au and founder/editor of www.TheDriven.io. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.