The clean energy industry continues to support a Clean Energy Target (CET) as proposed by the Chief Scientist. A CET in combination with the other 49 Finkel Review recommendations would ensure reform of the energy market to address any reliability or security issues, while driving much-needed new investment that would drive down power prices.
The Clean Energy Council is open-minded about the proposed National Energy Guarantee but requires more detail to form a position. The CEC will engage constructively with the Energy Security Board and the Federal Government on the merits and potential design of the potential policy.
The clean energy sector welcomes confirmation that the current Renewable Energy Target (RET) will remain unchanged. The RET is delivering unprecedented levels of new investment in clean energy and any future policy needs to ensure long-term policy certainty for new investment beyond 2020.
From the limited detail that has been released, it remains unclear how the NEG will ensure the investor confidence required to deliver a strong pipeline of new clean energy projects.
While we can comprehend how the NEG could ensure incentives for reliability covering all energy generation – including existing fossil fuel power plants – and emissions abatement, there is no guarantee that investors will see a price signal or the long-term confidence necessary to underpin new investment. It is this new investment that will place downward pressure on prices.
This risk was revealed by the preliminary analysis from the Energy Security Board advice to the Federal Government, which suggested that the NEG would lead to 28-36 per cent renewable energy in the generation mix of the National Electricity Market by 2030.
While we acknowledge that this is early high-level analysis, this estimate would mean between 250 MW and 670 MW of large-scale renewable projects would be deployed per annum from 2020 to 2030 (based on an assumed linear abatement trajectory and flat demand). This level of deployment would be further impacted should the scheme’s emissions trajectory be ‘back- loaded’.
This level of new investment is in contrast to the current 4300 MW of large scale renewables under construction or committed to begin construction in 2017, and statements from the Australian Energy Market Operator (AEMO) that it has registered over 20,000 MW of proposed renewable energy projects via its connection applications process.
While higher levels of ambition on emissions reductions would deliver different outcomes for clean energy, it is crucial we focus on understanding and informing the design of the core policy architecture at this stage.
Some of the key design issues that need comprehensive consideration include the following:
- The NEG is designed to deliver reliability and abatement, not an explicit amount of new clean energy investment. The design needs to ensure new investment is ultimately delivered
- The need for robust governance arrangements
- ‘Reliability’ must be carefully defined
- Emissions obligations, different trajectories and the use of abatement certificates and the impact on new investment
- Impacts on retail competition
- Transferring obligations for supply reliability from AEMO to retailers and the impact on innovation and competition
- Transferring obligations for supply reliability from AEMO to retailers – and the cost implications
- Transitional arrangements need to be clarified, particularly in regards to existing renewable energy policies
We will be focusing our efforts on these issues in order to increase our understanding of the potential risks and benefits of the NEG.
If this policy is going to be effective, we will need strong support from major political parties right across the country.
But first we need to ensure that we have a policy that will deliver the new clean energy investment and lower power prices that all Australians want. That’s likely to take several months of detailed analysis and consultation, and will be a high priority for the CEC during this period.
Kane Thornton is the CEO of the Clean Energy Council. This article is taken from the CEC’s newly released policy position paper.