The Coalition government is ramping up the pressure on the Labor states, seeking to paint the National Energy Guarantee as the middle path and the one and only policy option, despite its desperate attempts to shift the discussion to meet the demands of its own right wing.
Energy minister Josh Frydenberg used a National Press Club appearance on Wednesday to try and force the states to agree on the as yet ill-defined NEG, arguing that economics and engineering should triumph over ideology, and there was a need for a market based solution.
Nice words, but the cynicism is breathtaking.
Ideology? This, from a man who has spent much of the past 18 months demonising renewables, arguing in the face of all evidence to the contrary from the CSIRO and the network owners that high levels of renewables is reckless.
Markets? This from a man who has spent much of the last week trying to bully AGL into extending the life of the Liddell coal fired power station – against the company’s own economic and engineering analysis which finds that replacing it with renewables and dispatchable options such as storage is cheaper and cleaner.
Frydenberg now even laments the fact that consumers had suffered from the policy disaster zone that now afflicts Australia.
As well he might. It was the Coalition government – in an attempt to appease climate deniers and technology luddites – that tore up the carbon price and tried to do the same with the renewable energy target, the Clean Energy Finance Corp and the Australian Renewable Energy Agency.
It is the Coalition that has ignored the Climate Change Authority and its call for an emissions reduction target that is twice as strong as its own, and that has dumped talk of policy compromise options such as the Emissions Intensity Scheme, and ignored the major part of the Finkel Review.
Frydenberg also complained that energy had become a cultural battle, insisting that the “answer lies neither in war on coal nor the nationalisation of our assets.”
This from a minister in a government that has just paid $6 billion to nationalise Snowy Hydro, so it can go ahead with a $6 billion project for Snowy 2.0 which has yet to establish its economic, environmental or engineering credentials.
This, from a minister who continues to promise – at the insistence of the party’s all powerful dissenters – that coal will be protected and reinforced by the NEG, regardless of the country’s commitment and duties to the Paris climate treaty.
Frydenberg’s political play is to bully the states to accept the NEG because is the only option on the table, and the “last chance for bipartisanship”,
It is this or nothing, he says, but the tragedy is that most independent analysis suggests that nothing would be better than this.
Even without having seen any modifications to the highly criticised mechanisms within the NEG, it is clear that without a more ambitious climate target, this or any policy will be useless.
This is the shocking situation the country finds itself in. The attempted positioning of Frydenberg in the middle path could have been well predicted following the crazy proposals from the Monash Forum for a series of government funded coal fired generators.
The latest version of the NEG that will be distributed to COAG energy ministers before a meeting next Friday (April 20).
The NEG has all sorts of concerns. Its proposal for contractural arrangements to meet emissions and reliability guarantees is seen by virtually every industry participant and observer as a recipe to lock in the power of the big energy incumbents, a result that will push up prices rather than lower them.
The reliability guarantee is ill-defined, and risks enforcing a heavy hand for a problem that barely exists. The emissions target is manifestly inadequate.
Analyst after analyst, even big utilities, say Australia can and should do better, and to lock in current targets would actually be worse than usual, impose a framework that prevents investment, and would end up being an economic, environmental and engineering disaster.
Yet Frydenberg insists that this is the middle ground.
All the engineering analysis – from the Australian Energy Market Operator, from the CSIRO, the network owners, individual utilities and any number of analysts insist that a high renewable energy grid – even 100 per cent – is not just feasible, it would be smarter and cheaper and more reliable.
All the analysis, with the exception of the fossil fuel lobby, points out that wind and solar are substantially cheaper than fossil fuels, and even with storage costs to fall substantially still offer a cheaper option for “dispatch ability” than business as usual, and particularly coal.
More fundamentally, all the analysis shows that it is hopelessly short of the Paris climate targets that the Australian government signed up for, and which the Coalition hardliners want to tear up.
Oliver Yates, the former head of the Clean Energy Finance Corporation, and now head of UPC Renewables, compared to the NEG as a medication with significant and unwanted side effects – namely the failure to reduce emissions enough, and the locking in of coal generation.
“We need a policy …. but just because there is an internal fight in the Liberal party, doesn’t mean you need bad policy,” Yates told the ABC.
He pointed out the NEG would not just stall the renewable energy market – as illustrated by Bloomberg New Energy Finance and numerous other analysis – but would result in increased market concentration and the destruction of the forward market.
The Climate Council issued a briefing note on Wednesday highlighting the myriad failures and questions over the NEG. Apart from the issues over climate ambition, and the ill-defined nature of the reliability guarantee, there were fundamental concerns over the design of the scheme.
- 61 stakeholders raised concerns about the unwarranted cost and complexity of the NEG’s approach.
- 64 stakeholders raised concerns about the impact of the NEG on competition in the national electricity market.
This is basic stuff, and demonstrates that the NEG is so far from being an acceptable policy mechanism, regardless of the current government’s refusal to act on climate change.
It was ironic that at the same time as Frydenberg was presenting to the National Press Club, a motion was being put to the ACT legislative assembly that stated that addressing and mitigating global warming is both an environmental imperative and an economic necessity.
It noted that irenewable energy is critical in transitioning Australia to a low-carbon economy in the cheapest and most efficient way; that energy management, which includes both energy efficiency and demand response is the cheapest form of reliable capacity in the electricity sector, and that Australia must meet its Paris targets, which aims to limit the limit temperature increases etc 1.5°C.
The economics, the engineering, and the environmental arguments are quite clear. They point to a modern, smarter, faster, cleaner and cheaper grid that is based around renewables, storage, smart software, distributed energy and dispatchable power.
As Labor’s federal spokesman on climate change, Mark Butler, noted:
“Anyone paying attention understands that cutting carbon pollution in the electricity sector is the cheapest and easiest action that needs to be taken to meet even the Turnbull Government’s weak pollution reduction targets.
“Deep cuts in electricity pollution are made even more achievable because heavily polluting, ageing, and increasingly unreliable coal-fired power stations will need to be replaced in coming years, regardless of the need to tackle climate change, and the cheapest replacement options are low pollution renewables and storage.”
It just seems all too obvious. But only ideology, and a lack of respect of engineering and economics, will get in the way.
Read Frydenberg’s latest speech here.