NEG will block renewables, favour hydro and big retailers

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Industry experts back campaign opposing NEG, say it will skew the market further in favour of incumbents, stymie renewables, and favour coal.

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Residential electricity prices in Canada and the United States are typically less a half those in Australia. Tony Phillips/AAP
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Energy industry experts have thrown their weight behind a campaign to oppose the federal government’s National Energy Guarantee, describing it as a “woeful” outcome, both for Australia’s renewables sector, and for its emissions reduction and climate effort.

Speaking at the webcast of an “industry crisis meeting” hosted by the Smart Energy Council on Monday, former Clean Energy Finance Corporation CEO Oliver Yates, and Carbon and Energy Markets’ Bruce Mountain explained why the policy, even in its current pared-back form, was worse than useless.

The comments, made in support of an SEC-led campaign to oppose the NEG, follow last week’s COAG energy ministers meeting, which saw the controversial policy waved through to a final set of negotiations in August.

Yates, who is now the executive director at UPC Renewables, has been vocal in his opposition to the NEG, and said on Monday that the policy did nothing to encourage additional renewable investment – quite the opposite, in fact.

“It actually effectively legislates protection of the fossil fuel industry, and is actually quite damaging to (renewables),” he said.

“When the compliance price of electricity is zero, it actually means that there is no disincentive at all for coal-fired production, and therefore there’s no incentive to close those old coal-fired power stations.

“Therefore, they’ll continue to continue, and they’ll continue to pollute with impunity, stopping the much needed energy transition.”

Yates said that setting emissions compliance cost on a path to zero could “pull the carpet out” from under existing solar and wind energy investments and actually stop future investments.

“This is very bad for our industry and very bad for the nation as a whole, as this orderly investment and orderly transition towards using new generation assets is required.”

And – “as a banker” – Yates also warned against the mentality that the NEG could be legislated now, and tweaked later, under a future Labor government, or a more enlightened Coalition.

“It is impossible to invest on the assumption of election results,” he said.

“You cannot explain to your board, when you’re asking them to put money into a transaction, that the structural price of power could bounce around wildly, depending upon the outcomes of various state or federal election campaigns.”

“The only way that we can get certainty… is if the federal emissions level set within the NEG is around 50 per cent for the electricity sector.

“I can ensure you that no investor ever anticipated that the electricity sector would only reduce its emissions between 26-28 per cent by 2030.

“That outcome, that little level of emissions reduction will be a shock to the financial markets, and actually it’s a shock to many of us who are concerned, deeply, about climate change.

“It says, actually, that the government would rather protect fossil fuel generators from the impact of meeting our national emissions targets, where it is economically cheaper, and they’d rather make other sectors of the economy pay.

“This isn’t a campaign to just throw the NEG out, like what happened to the CPRS,” Yates continued, referring to the defeat of the Labor Rudd government’s 2009 emissions tracing scheme, in the face of opposition from the Greens.

“Because if the government … had meaningful emissions targets, the amendments that have already been made by the Energy Security Board have improved the system.

“But if the government is not prepared to change the emission reduction target from 26 per cent, then that is woeful, and it locks that inaction in place, and it locks our industry out of place – and that is not acceptable.”

Mountain, who has also been critical of the NEG in the past, said neither the low electricity sector emissions target, nor the allowance for the purchase of “outside” offsets to meet these targets “made any sense” to him.

“I don’t think they’ve clarified any of the difficulties in their previous version (of the NEG),” Mountain said.

“But they have made it less likely that the scheme will be invoked, anyway.”

Mountain said the standout concerns about the NEG were its potential to skew the market further in favour of large and incumbent energy market players; and the complete absence of an easily tradable emissions reduction instrument.

“The underlying policy intent that’s driven us to this (point),” Mountain said, “is that it can be said by the government that they’re not pricing emissions.

“I think it will asymmetrically work to the benefit of the buyers – the retailers – rather than sellers.

“I think the buyers, and most particularly the very large vertically integrated firms will have an advantage relative to the smaller (retailers).”

And Mountain said the NEG would also favour existing renewables – and particularly large hydro resources, most of which are government owned – over new wind and solar, no matter how cheaply, or effectively they could deliver emissions abatement.

“I also think there’s concerns of windfall gains in respect of existing zero emission power generation, and to me the principle issue here is it’s hydro…

“Wind and solar …was invested under a RET policy which was intended to be ongoing … If this scheme takes the place of the RET by 2021, arguably it’s an undermining of that scheme.

“Existing hydro, which was ring-fenced and had a transition arrangement… (it) would have a windfall gain because their generation, being zero emissions, would have just as much value in terms of (the NEG) as existing and new wind and solar, which is no additional emissions reduction,” he said.

“I think (the NEG) creates asymmetric benefit to the retailers, rather than to wind and solar customers – existing and future. And in that sense, although it has a potential to reduce emissions, it will do so more expensively than the alternate policies that have been adopted here and elsewhere.”

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31 Comments
  1. Joe 1 year ago

    So Two Tongues Turnbull ends up delivering Abbott’s policy….block the RE and keep Old King Coal going. Labor, Federal and State, needs to draw a line in the sand. The Planet, our future, demands it.

  2. Rob Farago 1 year ago

    Security Energy Council?

  3. Chris Fraser 1 year ago

    2018 : “We now wish we knew earlier, even though we tried to downplay all of it. In spite of our best legal advice, in spite of all the complaints from our public. We’re sure we didn’t know about the No Fee For Service rorting, the Banks’ charging of fees even though they knew the account holders were dead … we didn’t know, but now we do, and we wish we had the Banking Commission earlier. Mea Culpa”2030 : “We wish that we knew, we tried to listen to those that tried to warn us. Those voices must have been drowned out by the deniers. We thought the Reef would be fine … we didn’t understand the 97% of qualified scientists who advised us, even though we didn’t pay for their opinion. We thought we were putting downward pressure on energy prices. We didn’t know the responsibility for the solution was on us. We just assumed the market would provide the solution. We didn’t think we were creating artificial obstacles. Someone else always works it out for us. We should have known. We wish we knew. Mea Culpa”

    • Jo 1 year ago

      so true. and so sad

    • Joe 1 year ago

      Exxon, The Fossil Fuel King of Kings, very own scientists knew about the link of FF use and Climate Change decades ago but it was kept quiet. The United Nations via The IPCC has been publicly banging the climate change drum for some 30 years. So what excuse is there for this ‘addiction’ to continued FF use?

      • George Marsh 1 year ago

        Even Margaret Thatcher spoke of it back in 1989 or so ….

        • Joe 1 year ago

          The Conservatives in the UK ‘get it’ when it comes to climate change and getting off FF. Yes, you are right that Maggie T got the ball rolling in the UK all those years ago and each subsequent Govt. of the day has continued the RE transition…no ‘political climate wars’ in the UK.

    • caffdan 1 year ago

      This will play out exactly like that. I say we should start suing them now.

  4. Hettie 1 year ago

    Those of you who like a laugh, and dog knows we need a few laughs in these days of entrenched government lunacy, might like to have a look at ” The Conversation for April 18, where an article from one David Blowers has written that the NEG is edging closer to reality. All codswallop, of course. The comment stream stretches, and stretches, but is notable for one Robert Fantozzi, who disputes all allegations that renewables plus storage are very nearly cheaper than new coalers, and getting cheaper all the time, etc etc.
    When pushed, he gave 2 links.
    One to somebody Mackay, wittering on about an e-bike trip he took recently, and the other to a book written in 2008, “Renewable energy without the hot air.”
    As you may predict, my reply was somewhat trenchent, about the relevance of 10 year old pricing data to the prices of RE in 2018.
    The amusing part is that he then provided a link about how individuals can reduce their carbon footprint.
    Arrogant git.
    I hope he chokes on my response to that.
    You may enjoy the thread. If you can be bothered.

    • Joe 1 year ago

      OMG, young Hettie you are a gem! I am just new to receiving ‘The Conversation’ so I had a look at the ‘slow march…’ item that you mentioned. You really served it up with your many contributions and I enjoyed your plugs along the way for the Renew Economy newsletter. Your reply to your ‘new bestie Robert Fantozzi ‘ about carbon footprint is the best of the best. More power ( that be RE power of course ) to you. Go well Young Hettie.

      • Hettie 1 year ago

        I thought you would enjoy it. Glad you did.

    • Ren Stimpy 1 year ago

      Nice one. It’s probably time to stop engaging these people in a cost vs cost argument and just slam the kernel of the issue down on the table from the outset, which is

      >>> There will never be another coal-fired power station built in Australia. <<<

      The private sector won't build one. The private sector don't give a rats about the energy security of the grid. They are not charities, they are in business to make money. There is too much financial risk of a carbon price being put in place within the next 30 years, and probably within the next ten years. Some people can choose to deny climate change if it suits them, but what they can never deny is the risk climate change has created in new long term fossil fuel investments. Even without a carbon price, the cost of power from a new coal power station would be nearly double that from an already-depreciated coal station, and boosted up by the high cost of so-called "low emissions" or "carbon capture" add-ons to the plant.
      The public sector won't build one, that would require a return to the leadership of Tony Abbott and Barnaby Joyce, a political impossibility. In fact a double political impossibility, because even if their parties miraculously happened to restore them as leaders the people would then vote them out of government in short order. Both Turnbull and the new Nats leader Michael Whatshisname have said it's up to the market to build one and, as per above, the market won't do it.

      So having established that fact, the argument will probably then move on to nuclear vs renewables, at which stage just chalk it up as a victory for renewables, because the chances of a nuclear power plant being build in Australia are less than the bugger-all chance of a new coal station.

      • Hettie 1 year ago

        All good points, Ren.
        However, The Conversation is hardly a publication for idiots. Readers are for the most part well educated, articulate people, who write thoughtful comments. But even amongst that readership, the level of ignorance about the electricity market is horrible. My ignorance was horrible a year ago, before I started reading and participating in R E. So I try to share a little of what I have learned with a group of people who possibly want to learn.
        Not the technical stuff. That’s way above my pay grade, and neither I nor anyone not directly involved needs or wants to know. Just as one doesn’t need to know the details of how a ICE car works to be able to drive one.
        But power is a big item in the household budget, a big political issue, and even well educated people have no idea about the costs of renewables vs coalers.
        It seems that this newsletter and Renew magazine are the only readily available sources of information.
        So I try to bring a little light in the darkness.
        The readership of T C is a world away from Malcolm Roberts. Why not give them the info that some of them clearly want?

    • RobertO 1 year ago

      .Hi Hettie, I had a look at some of Robert Fantizzi comments and most of they are just plain wrong. There was only one comment that seems to me to be correct “That every thing will be driven by economics”. The cheapest solution will win out is correct (and it may not be the best solution) but 99% of people put zero cost on their enviromental footprint and from that you can deduce that Human Life on this planet has zero costs. The hardest part will be getting the 99% of people to realise that the enviroment has a cost and that we will all need to pay for it otherwise it has the potential to kill all human life.

      • Joe 1 year ago

        As long as families / households can have 2.3,4 or more cars in their garage / driveways, as households have someone else to worry about disposing of our waste, as long as households can flick on the Air Con whenever the urge arises…..then environmental footprint is just an after thought.

      • Hettie 1 year ago

        You know that, and I know that, but I very much doubt that RF, the ignorant, arrogant git, knows that.
        I have just spent two hours following the thread though to the bitter end, and have now unsubscribed from comments on it, but I finished with a fairly savage reply to the accusations that I know only about my own household issues.
        It never ceases to amaze me how ready some men are to assume that any woman, particularly an old woman, must be ignorant.

        • Ren Stimpy 1 year ago

          I read it again and I reckon you did pretty good Hettie. The guys you were arguing against are fixated on the present, not the predominant trends like they should be. And you’re basically right the cost reduction trend happening in renewables is the most predominant trend.

          It was an interesting discussion all up. One chap struck a chord with me in his comment about the absolute squander of money that buying overseas carbon offsets would be. I really can’t think of a blacker box into which to throw money. We’ve seen some fantasy phantom magic climate “action” from this Coalition government such as the ERF but overseas offsets really takes the cake.

          • Hettie 1 year ago

            If you can bear it, Ren, take another look. I spent another 2 hours this afternoon with a whole new set of idiots who tried to see my answer to the carbon footprint challenge as evidence that my experience and knowledge is centred entirely on my own household issues.
            I have now unsubscribed to the comments, but still have access to them, and will go back to see what the reaction has been to my last spray.
            Cheers.

          • Joe 1 year ago

            Ya done good young Hettie. Those wankers…there are no words.

          • Hettie 1 year ago

            It’s very sad, isn’t it, that some people can be so determined to deny what is patently obvious, and so transparently frightened of conceding that someone else may be better informed.
            Dare I suggest that there is misogyny involved?
            There was such disapproval of my refusal to be browbeaten, such determination to dismiss me as ignorant, then limited to the domestic field, total refusal to concede a single point. It felt very much to me like “Bloody woman, what could she possibly know about this?”
            What do you think, Joe, Ren, Robert, Mick? Others too who have answered my questions, helped me to learn without any hint of mansplaining. I would value your opinions.

          • Joe 1 year ago

            Hello young Hettie. There will always be people that just plain refuse to ‘accept’ no matter what the science, evidence or truth that sits right in front of them. Sure, everyone is entitled to an opinion and most people base their opinion on logic. Sadly there are the outliers like the mob on ‘The Conversation’ whose opinion is based at best on ‘cherry picking’ or at worst on fantasy. Fantasy has its place in life but fantasy does not replace reality. Climate Change and its impacts ARE reality no matter how much the outliers would like to think that it is fantasy. Hettie stay your course and perhaps ‘accept’ that no matter how much you try to educate them, the outliers are not for moving from inside their little world in a cocoon of fantasy.

          • Hettie 1 year ago

            Thanks, Joe. That’s a comfort.
            Having thought about it, I realise there were just two arguing against me. Which raises the thought that the rest don’t bother to say if they agree, or not. Which seems a shame. It is, after all, supposed to be a conversation.

          • Ren Stimpy 1 year ago

            It’s likely there’s a big element of politics involved. A lot of people on the right bash all progressive policies regardless of science and logic, and a lot of people on the left bash all conservative policies regardless of a few economic realities. We’ll end up like America one day – ‘total politics’ with no bipartisanship, just a giant gulf between the two sides.

          • Hettie 1 year ago

            You can imagine, Joe, hoe much spiteful pleasure it gave me just now to find the piece on Westpak Bank going renewable in Thursday’s RE, and post it as a reply to the charmless Fanta. Let him put that in his pipe and smoke it.

          • Joe 1 year ago

            If I remember correctly ‘Fanta’ was a very popular fizzy drink in my now ‘younger’ years. Although I do have to say that the taste never really agreed with me. Much like our ‘scribbler Fanta’, he isn’t agreeable to me either…must be something to do with the name ‘Fanta’.

          • Ren Stimpy 1 year ago

            A Chiko Roll and a can of Fanta: 80 cents. A Chomp bar: ten cents. My Sharona on the dukebox: 20 cents. A game of Space Invaders: 20 cents. The memories: priceless.

  5. Ian 1 year ago

    So if a manufacturing facility is in an area with poor solar aspect, has onsite generation and wants to contract some PV in a better solar location, would an off market transfer be subject to NEG constraints? The impact on the NEM would effectively be zero.

  6. BilB 1 year ago

    The fix for the “behind close doors” maneuverings of vested interests against the public interest is to bring this whole affair out into the open.

    Demand a Royal Commission into Australia’s Response to Climate Change.

    The entire 20 year lead time to reduce emissions has been squandered by egotistical and ideological grandstanding. Science and public interests have been pushed aside to favour a handfull of self interested opportunist resource exploiters.

    Phone and email your local MP today and demand Climate Action accountability.

    Demand a Royal Commission into Australia’s Response to Climate Change…..now.

    • Joe 1 year ago

      We know how much The COALition loves a RC…but only a RC if it throws dirt at Labor to further the COALItion’s political end game. I’d love to see Labor / Greens get a RC up on Climate Change and then follow with prosecutions for ‘Crimes Against Humanity”. The COALition mob, Abbott, Two Tonguer Turnbull, Coalavan, Bananabee, Kelly and the rest, The MCA, Rupert and the Editors of his newsrags, The Radio shlock jocks Jones, Hadley, Smith and the rest. Put them all in the dock on public display and shown in all their infamy on our nighty news.

  7. Ben 1 year ago

    I’d expect renewable industry vested interests to be concerned about eventually reduced renewable subsidies. That makes sense.

    But the coal fired power stations are ageing and will be retired on schedule, as noted regularly in these pages. Also noted on these pages is the cost of renewables is reducing and should be competitive with any other form of generation.

    So I don’t think there’s too much to be worried about, as far as renewable investment goes, especially given the existing pipeline of projects. We might get some more gas turbines one day, but it’s not like any banks would be game to finance a coal power station with the activism they would attract. I imagine any chance of nuclear power would have to overcome similar opposition.

    What isn’t noted however, is that if climate change turns out to be a thing, Australia’s electricity sector emissions are so low anyway that a few more years of coal power won’t make a difference.

    • Ren Stimpy 1 year ago

      The main thing we need to be concerned about is competition. We need a variety of renewables players in the market to compete with the ‘big three’. The NEG doesn’t address this concern in the slightest.

      Btw many of the banks have their own “activism” built into their fossil fuel energy financing parameters. For example limits on emissions per MWh in the projects they will lend to. Climate “activists” are just as likely to wear three piece suits as tie-dye these days.

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