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Frydenberg says NEG won’t stop investment in cheap wind and solar

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Federal environment and energy minister Josh Frydenberg says the proposed National Energy Guarantee will not put a stop to new investment in wind and solar farms, because of the falling costs of the technologies, as well as battery storage.

“I’m confident we’ll see continue to see under the National Energy Guarantee significant investment in renewables,” Frydenberg told Reneweconomy on the sidelines of the Energy Networks Australia conference in Sydney, following his speech that opened proceedings on Thursday.

The NEG – a final draft of which is expected to be completed by the Energy Security Board next week – is designed to marry an emissions obligation and a reliability obligation.

However, after many of the details of the mechanism have been resolved, there is still huge concern that because of the federal government’s weak emissions reduction target – just 26 per cent below 2005 levels for the electricity sector by 2030 – it will provide no signal for new investment, least of all renewables.

That appears to have been the conclusion of the initial modelling for the policy, which indicated little investment in new wind and solar from 2020 until 2030, a view shared by analysts such as Bloomberg New Energy  Finance, Green Energy Markets, and S&P.

And while ESB chair Kerry Schott has dismissed the idea of new coal generation, and been shouted down by government ministers and backbenchers for saying so,  Frydenberg has insisted that the NEG offers the “best chance” for existing coal generation to remain in the system.

RenewEconomy asked Frydenberg after his speech why the federal government refuses to lift the ambition of its emissions reductions for the electricity sector, given that most studies suggest that target will be largely met by 2020 because of the massive investment in wind and solar under the renewable energy target.

“What’s in favour of renewables is the declining cost curve,” Frydenberg said. “We’ve seen the price of wind and solar come down substantially, and the price of batteries come down with that too.

“You will see more investment of renewables coming into the system. The National Energy Guarantee does have the right level of emissions reduction, and at the same time it will put a premium on reliability which will be important in the system. So we think we have got the balance right.”

But, RenewEconomy asked, what investment signal will that send if the emissions target is already met, or as good as?

“The investment signal is the National Energy Guarantee framework, which has a decreasing emissions profile and an increasing reliability profile,” Frydenberg said.

“I’m confident that we’ll continue to see under the National Energy Guarantee significant investment in renewables.

“Let’s not forget Giles, because you obviously don’t give us credit for this, because it doesn’t suit your narrative, but the reality is that Australia has under the Turnbull government seen a record level of renewable investment.

“We are now the third most popular renewable investment destination in the world, on a per capita basis, more so than France, more so than Germany, even China … we’ve seen $10 billion worth of renewable investment deals finalised and closed over the last year.

“It’s very significant indeed, something that you have conveniently ignored in your publication.”

RE: “I don’t think we’ve ignored it, we’ve just pointed out that it is through a mechanism that you guys tried to destroy.”

JF: “You’ve ignored the boost in renewables under the Turnbull government’s watch.”

RE: “Every day we talk about the boost in renewables, I think.”

RE then asked if there was to be any further modelling released with the new draft due next week, but that was flat-batted and Frydenberg left with the observation that “households will save under the National Energy Guarantee, that’s something you should tell your readers about.”

As we reported in November, the NEG modelling predicted that households could save up to $400 a year by 2030, but it recognised that most of these savings would be delivered by the reduction in wholesale prices caused by investment in wind and solar under the RET.

If new modelling is released, it is going to be interesting to see what it says. The original version, which predicted only a modest rise in wind and solar investment over the 10 years, assumed costs of wind and solar far higher than what they are now.

Indeed, the industry is talking about large-scale solar costs of less than $50/MWh, little more than half the cost assumed by the ESB, and this could fall further given the expected surplus of solar modules caused by policy changes in China. Even with storage, “firm solar” is priced at $70-$80/MWh.

All eyes will be on the other key details of the draft NEG when it is released, and it will then become subject to weeks of submissions, feedback and negotiation before a final version is put to the COAG energy ministers in Sydney in July.

With the Turnbull government refusing to budge on its targets, and facing internal division from its own right wing that it has already gone too far, the focus will be on the treatment of individual state targets, and the ability of the mechanism to be scaled up with a future government or a change of mind in the Coalition.

Frydenberg has insisted that the Coalition wants to “lock the target” in until 2030, but this will be fought by the states, federal Labor, advocacy groups and one presumes many in the energy industry, particularly as Australia will be expected to lift its climate targets in 2019 under the review scheduled for the Paris climate treaty.

In the meantime, the renewables industry will turn to the Victorian and Queensland state targets (40 per cent by 2025, and 50 per cent by 2030), as the chief mechanisms to encourage more wind and solar investment.

Those, and the burgeoning corporate market, that has seen the likes of CUB, Mars Australia, University of Queensland, Nectar Farms commit to going 100 per cent renewables within the next year or two, and others – including steelworks and refineries – using solar to offset their energy costs.  

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  • Simon Mathis

    Can’t see the point of it … if the emissions guarantee is met before the NEG starts and the reliability guarantee isn’t expected to be called in the next decade … Or maybe that is the point, toothless bureaucracy.

    • riley222

      Sometimes dithering can be the best option. Given the divisions in the LNP and what is actually happening on the ground, Frydenberg has a point.
      It looks like the ‘Tassie battery ‘and interconnectors are being looked at seriously, a prospect I had given no chance to a little while ago. Of course a lot more could and should be done, but politics being the art of the possible they’re on the right track at least. I think of wrecker Abbott and co and give thanks for small mercies.

      • Peter F

        The problem is that the Tassie battery and Snowy II and the necessary interconnects are a vast waste of money

        • RobertO

          Hi Peter F, I think you have missed the point, Snowy 2 is not yet confirmed (both 2tongs and paul broad want this), I believe they will do it based on some business case that very few people will see. I suspect that the NEG has been touted as a support system for Snowy 2 the ability to change RE for “Baseload supply”.
          As for the Battery of the Nation I am very happy to see this. It is a plan and we need a plan for the NEM (and I believe that it will be maybe 1 interconnector with about 1500 MW wind and maybe some peaking hydro and maybe 1 to 2 of the best PH. Tassie will become a almost full time exporter). In 21 years time we may consider more of this plan based on security issues. In both cases we will not see the business case (for either) and as such we can only hope that the “Boards” get it right.
          Interconnects have a function in Security of supply issues. Build local, use local, store in local area (I prefer PHES over Chemical Batteries) and build better interconnects for security of supply.

    • john

      I think they hope to have in place every Renewable Energy producer must have an equivalent amount of storage to the amount of MWh of power they can make per day. This would ensure that the sub $50 solar is then boosted to north of $80 or so per MWh keeping old build FF still in the game.

      • solarguy

        Every region in the country will have to have a certain amount of storage eventually anyway. What is needed is a government that will listen to RE experts and engineers and devise a plan for the grid going forward, that is cost effective and reliable. Finkel, I believe was on the right track.

        There are a different models of how that can be achieved. One thing for sure is that roof top solar and storage is going to be part of the solution, just not the major part.

        • Joe

          Finkel ? Who is he again? And yes I am being sarcastic.

    • Peter Campbell

      Guarantying something already achieved is a good strategy. You can never be criticised for failing to meet the target!

  • I’m incensed that JF is saying, in effect, that despite the Turnbull Government having an anti-renewable energy policy, $10 billion was invested in renewable energy in Australia in the past year and that the Federal Government should be given kudos for that! Can you imagine how much investment there would have been if the Feral Coalignition Government had a pro-renewables policy?

    His statement, “the reality is that Australia has under the Turnbull government seen a record level of renewable investment” shows how disingenuous JF is and how utterly stupid the policy is when it is holding back thousands of jobs and cheaper electricity from the people of Australia because of the right wing, ignorant idiots with the Government. What a joke! I can’t think of words strongly enough to berate this ‘logic’ behind this feeble thinking!

    • john

      It is rather poor to claim credit, when not one to my mind within the present Government has said 1 thing positive about using Wind or Solar let alone any type of Storage, except for Snowy 2, and then claiming the credit for the amount of build that has taken place.

      • Glynn Palmer

        I think Josh’s strategy is to walk a fine line between a slow and steady reduction in emissions from retiring coal, and the internal coalition opposition of Abbott, Kelly and Joyce. He still has to make STUPID announcements about extending the life of retiring coal generators.

        Hopefully at least Kelly and possibly Joyce won’t get back at the next election. And maybe 52% of the vote will be enough to give Labor and the Greens the majority of seats.

      • Joe

        Spot on. Never a kind word about the ‘Leadership’ of ex-Premer Jay and the other Labor states with their RE targets. Every chance they could it was a public spray against ex-Premier Jay. All we got from the Joshua, Two Tongues Turnbull & posse was insults like…left wing, ideology, lunacy etc. And now the Joshua has the gall in speaking with Giles to take credit for what has miraculously eventuated with Renewables around the country DESPITE all the blockings by The COALition. The Joshua is a disgrace and should resign.

    • Phil NSW

      It was only achieved because they caused sky high electricity prices. If that is something they want to take credit for then tell the electorate they did so deliberately.

      • Rod

        You are correct. Abbott who has been a failure at everything he does and Turnbull who thinks he is clever but is usually proven wrong, in their attempts to placate their coal donors, have been a major cause for households and business doubling down on solar.
        We also have Labor to thank for the LRET, ARENA and the CEFC who have all been instrumental in the utility space success.

  • juxx0r

    How you come up with an article as balanced as that after being treated like an idiot by that tosser is beyond me.

    • Joe

      Juxx, nicely put.

  • Chris Fraser

    The ESB knows coal investment has tanked. It knows there are better things we can do with it apart from combust it. All this constant interference in phasing out coal burner generation, especially from a market-led government, is rather disgusting and concerning.

    • solarguy

      You left out criminal.

    • neroden

      Right-wingers *hate* free markets. Always. Everywhere. Right-wing policy is always to give special unearned power to whoever the incumbents are.

  • Rob G

    It’s amusing to think that RE would have agenda (narrative). The only real agenda going on here is the spin coming from his mob. I understand Josh does get it – but buddying up to the likes of Craig Kelly with his shouting down Labor’s 50% renewable target does him no service. And Australia’s renewable attraction vs Germany is a simple matter off good sunshine (and wind and space), not amazing policy as Josh would like people to think.

    • Joe

      And who produces more solar and wind energy out of Germany and Australia?

      • Peter F

        Not only does Germany produce more energy from wind and solar in spite of their poor resources, it installed 6.7 GW of wind and 2.2 GW of solar last year, significantly more than us. We are catching up this year but to the end of May they installed about 800 MW of solar and 1,500 MW of wind, still somewhat more than we connected

    • John Saint-Smith

      Josh has repeatedly attacked the ‘overly ambitious and frankly dangerous’ targets set by South Australia and Queensland, but seems to be setting himself up to take the credit for it when they reach them, or the credit for stopping it if they don’t. I guess he’s learned that trick from two tongues Turnbull.

      • Joe

        The Two Tonguer was out and about this last week travelling the drought sticken farmlands and admitted its all about climate change. He knows the problem and does sweet eff all about it. And now the Joshus is crowing how awesome he / Turnbull are doing with the $billions in RE investments. What a nerve these jokers have!

    • Peter Campbell

      If Josh gets it and Turnbull gets it, and presumably a fair few others of the LNP, how and why are they so unable or unwilling to slap down Canavan, Abbott and Kelly?

      • Phil NSW

        What does that crowd hold over Turnbull?

        • Jonathan Milford

          The IPA, the Murdoch press and a wafer thin majority.

          • Greg Hudson

            Don’t forget the ‘donations’…

  • Rod

    A picture is better than a thousand words.
    Grinning Liberal idiots at the front and Canavan for some reason.
    And sombre Shane Rattenbury at the rear.

    • Joe

      Young Lily was probably looking for somewhere to hide from the Joshua but the Shane already beat her to the rear.

      • Tim Buckley

        The gender balance in the LNP is very clear in this photo – clearly irrelevant to them. Getting rid of old white male luddites in favour of anyone else would improve the rational debate and bring the LNP into the current century!

  • Peter G

    Thanks for another great article Giles, reading RE is a high point in my day! Great journalism that consistently exposes humbug and tosh.

  • John Saint-Smith

    Giles, your patience deserves a medal. I’ve had more intelligent conversations with 14 year olds trying to explain why they haven’t done their homework! This one sounds like “The homework ate my dog.”

  • Phil NSW

    I am amazed that the Turnbull government is taking credit for the solar investment in Australia. The only way it was achieved was because of their bad policies and interference in the energy market. If by forcing up the price of electricity to unbearable levels was deliberate government policy to force individuals to generate their own electricity to offset the price then this government should be taken outside and dealt with by the usual means for scoundrels like them. We know the NEG has been and will continue to be a total waste of time even before the draft has been released. I will review the draft and comment accordingly as I did with original submission. I hope more concerned Australians should consider who is to blame for the current electricity prices, the lack of reliability of the network and the weak emissions target and respond if they consider it sounds like business as usual.

  • Cooma Doug

    The predictions for 2030 are going to be wrong by so much we will be able to put it in the bin by the end of 2019.
    The things that will be making us smile in the next decade are not talked about much yet.
    The new load side market technologies will create these windows.
    One thing that annoys me is that the NBN fiasco might be a drag on the possibilities of rapid response load shifting stability management. I believe there will be opportunitues emerging that will surprise us all.

    • solarguy

      Let’s hope it’s a nice surprise.

  • Chris Pitman

    I notice this morning Saturday , the LNP blaming the renewables for the thermal generators going off line this week.

    • Joe

      Its always Labor’s fault OR Renewable Energy’s fault.

  • solarguy

    You are a cooler man than I Giles. If I had interviewed the prick there would have been a lot of expletives launched at the snide wanker…………………..gov taking credit for RE investment. Typical pollie bullshit.

  • neroden

    It’s true that the NEG won’t *stop* investment in wind and solar — nothing can stop investment in wind and solar — but the NEG will *slow down* investment in wind and solar. It has been proven that the NEG is literally *worse than doing nothing*.

    So maybe Frydenburg should just DO NOTHING. It would be an improvement.