NEG would drive electricity prices up, not down, says report | RenewEconomy

NEG would drive electricity prices up, not down, says report

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Report says NEG would fail in most basic and important function: reduction of Australia’s wholesale electricity prices. Rather, it would drive them up after 2020.

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As pressure mounts for Australia’s states and territories to finalise their position on the National Energy Guarantee, a new report has warned the federal government’s policy would fail to achieve its most basic and important function: to lower energy costs for consumers.

The report, commissioned by Greenpeace Australia Pacific, says the Coalition’s NEG would in fact do the opposite – raise electricity prices; as well as bringing investment in large-scale renewables to a halt, and do nothing to combat climate change.

Based on analysis conducted by energy and environment analysts RepuTex, the report models the impact of the NEG under the government’s 26 per cent emissions reduction target, compared to a more ambitious 45 percent target.

In both scenarios, as shown in Figure 17 above, electricity prices are forecast to fall through to 2020 as more than 6GW of renewable energy enters the NEM under large-scale renewable energy target (LRET).

“The increase in low cost solar and wind generation will see the electricity supply steadily become more competitive, with average prices less influenced by high priced gas, and subsequently falling toward $60 MWh in 2020,” the report says.

But under the NEG, new investment in renewables falls off a cliff after 2020, while the impact of the reliability guarantee drives an increase in gas generation, prolongs the phase-out of coal, and makes it harder for key new technologies, like battery storage and demand management to compete.

“The result is the continuation of a coal-dominated market with a fairly static picture for large-scale renewables investment, with gas providing flexibility to meet evening ramp ups,” the report says.

“As a result wholesale prices rise above $70 per MWh after the closure of Liddell, and $80 per MWh after the expected retirement of Yallourn in 2028.”

A more ambitious emissions reduction target, however, of 45 per cent, would provide a signal for investment in more solar and wind, driving prices down by around $20/MWh,

“The competitive pressure from higher solar and wind energy is modelled to push wholesale prices lower, eventually resulting in the closure of excess coal capacity” – around 9GW, in total, by 2030 RepuTex says.

“As intermittent renewable investment occurs, this low cost generation also displaces some dispatch of gas generation during the day, and increases the opportunity for energy storage of excess renewable energy.

“As a result wholesale electricity prices oscillate around $60 per MWh through to 2030, rather than rise above $80 per MWh as seen under the low investment scenario under a 26 per cent NEG.”

The findings come just weeks ahead of the August 10 “deadline,” the date of the next COAG Energy Council meeting, when the states and territories expected to come to a decision on whether or not they will sign up to the federal government policy.

All states and territories in the National Electricity Market (NEM) have to agree to adopt the NEG before it can become law. Ahead of the August meeting, energy ministers are expected to receive an updated version of the policy.

But support is not guaranteed, particularly from those Labor states with high renewable energy targets, including Queensland, Victoria.

And the ACT has all but pledged not to sign up to the NEG as the policy currently stands – for all of the same reasons outlined in the RepuTex report.

“The ACT has been very clear that we cannot sign up to the deal in its current form,” territory energy minister Shane Rattenbury said, again, on Tuesday.

“The 26-28 per cent emissions reduction target is clearly not ambitious enough, and will make the task (of decarbonisation of the economy) more costly, more difficult and certainly more politically difficult than cutting from electricity sector.

“We are also skeptical about the NEG bringing down electricity bills,” he added. “And if other sectors are going to have to do heavy lifting (on emissions reduction), then it will lift costs in other key areas, like food and transport.”

Rattenbury said the ACT also had “significant concerns” about the use of offsets, as proposed in the NEG; about the lack of additionality for state climate action, and the lack of a mechanism to ratchet up emissions reduction ambition in the future.

“We are, I should add, also very concerned that (federal energy minister) Josh Frydenberg is trying to lock in an answer from the states by August 10, and then has to go back to the party room.

“We would like to have some assurance that there will be no deals made (for the subsidisation of new coal) after the fact,” he said.

On the mix of energy generation that would evolve under the NEG, as compared to under a 45 per cent emissions reduction scenario, RepuTex confirms concerns that the former – basically business as usual – would wind back investment in renewables and battery storage, stifle competition, and favour higher emissions sources.

“We estimate 42 per cent of generation will be derived from renewable energy sources in 2030 (Figure 7), derived from current national policy, more than the 32-36 per cent modelled by the ESB,” the report says.

“Given this pipeline, a 26 per cent NEG is modelled to have no impact in driving any new renewables investment beyond this level.”

Under the 45 per cent scenario, however, demand for more clean energy and falling solar costs drives the addition of almost 14GW of large-scale PV by 2030, in addition to the 12 GW of small-scale PV, the report says.

Wind energy also makes a major contribution, with 9GW of wind capacity added by 2030, 2GW of which is expecetd to come from offshore developments.

Meanwhile, almost all of forecast growth in electricity demand is expected to be met by increasing rooftop solar uptake, while retiring coal plants are replaced by a combination of dispatchable gas, solar and wind, demand response and other flexible
storage liked battery and pumped hydro.

“The evidence is clear: more renewables make power cheaper and cleaner,” said Greenpeace Australia Pacific Head of Research and Investigations, Nikola Casule, in comments on Friday.

“This research by Reputex exposes Malcolm Turnbull’s 26 percent target as grossly inadequate, failing both on power prices and on carbon emissions.

But Casule said the pressure was now on the state premiers to ensure Turnbull’s lack of backbone on climate and energy was not enshrined in the law.

“If the Victorian and Queensland Premiers vote for the NEG, they will own the consequences of hobbling the renewables revolution as much as Malcolm Turnbull and Tony Abbott already do.

“It will become Daniel Andrews’ and Annastacia Palaszczuk’s NEG – the higher power bills, environmental damage, and carbon pollution that will result will be theirs.”

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  1. MaxG 2 years ago

    The NEG, as it stand, only creates damage, as desired by the LNP and the supporting corporations, solely to protect their interest, not those of the people,
    A lot of people I spoke with recently are starting to catch on that the ALP is hardly any better then the LNP when it comes to pressing issues such as privatisation, climate and energy policy… hence, what needs to happen to realise that the only party really standing up against the corporate sponsored politicians are The Greens, and actually start voting for them. Give it a try at the next election at any level: first vote green, second red, last blue. This means, The Greens get stronger, and all failing, the reds will get in anyway (hence, the risk you take is minimal, but the message you sent is huge).

    • Peter Campbell 2 years ago

      Preferential voting is a wonderful thing.

      • Ben C 2 years ago

        in certain cases i agree, but i can also see times when it can be damaging to a democratic society. for example if you only like one party, and are forced to give consent for other parties to potentially rule. If i dislike all parties equally (or only one party) i cannot express this on a voting form, which i think is a shame given we supposedly live in a democracy and have a right to vote as we please. the fact voting is compulsory, which essentially means its no longer our right, is a similar shame, as the right to something also involves the right to refrain. by forcing people to vote preferentially, they are taking away peoples right to choose who they give consent to rule, which is a slippery slope. for example what if i only like the greens, and don’t want to be forced to give a tick of approval to red or blue in second place? by forcing preferential voting, one could argue they are taking away a fundamental democratic right.

        • MaxG 2 years ago

          The problem is, AU has a winner-takes-it-all system, while I’d prefer the proportional representation systems, which aligns closest to the idea of democracy… as in each group, minority or majority should be represented (though proportionally) in the democratic process.

          • Peter Campbell 2 years ago

            I agree. I would much prefer federally to have a system like Tasmania and the ACT with multi-member electorate giving something close to proportional representation.

        • Peter Campbell 2 years ago

          I think it would be very rare to find someone who really believes that after their first choice, all the other candidates are precisely equally abhorrent. Possible in principle but very unlikely. Even if you genuinely thought, for example, that Labor and Liberal were just about as bad as each other (a commonly expressed but lazy opinion, I suggest), I would be astonished if you could not find even one small reason to prefer one as just slightly not quite as bad as the other, or even just considering the particular local candidates for one party ahead of the other.

          • Ben C 2 years ago

            yeah that may well be the case in practice, but i shouldn’t be forced to give my consent just because a party is “just slightly not as bad”. that’s whats wrong here. if i don’t like a party i shouldn’t be forced to pick the lesser of two evils, i should have the right to refuse to give my consent for them to rule.
            by forcing me to pick a lesser of two evils, they have gained my tick of approval, despite the fact that i don’t give my approval at all.

            contrary to the popular claim that by not voting for the lesser of two evils i am complicit, i would argue that by voting for a (still “evil”) lesser of two evils i am complicit in everything they do, and i have waived away my right to complain, because my vote or a part of my vote went to them, and helped them do what they’re doing.

            and i wouldn’t have to find all other parties “equally abhorrent” to refuse to vote for any of them, i would just have to find them all undesirable enough to refuse to consent to them. thinking that they must be equally abhorrent to not gain my vote is, with all due respect, a flawed mentality. and i mean no offence by that, it’s just an opinion.

            the rebuttal to the statement i just made is that someone is going to rule anyway so you might as well exert whatever influence you can, to which i repeat that by doing so i have given a non desirable government my tick of approval, and i have waived my right to oppose them. i would prefer to protest governments i don’t like by not voting for them in the first place, which removes my responsibility for their actions.

            i would just like to say that i mean no offence or malice in my reply, i just find it an interesting debate, and enjoy discussing it with mature level headed commenters. i wouldn’t even bother posting this on most comment sections because everyone would just foam at the mouth and shout, but that’s whats so good about the commenting section of this website.

            I hope you’re all having a good day

            -Ben C

        • hydrophilia 2 years ago

          Nonsense. If you only like one party you only vote for one….just like now. The only difference is in the far more common case in which there is a party or candidate you prefer and another that you find acceptable and think could win. If the USA primaries were ranked choice Trump would never have won…. I hope.

          • Ben C 2 years ago

            i had been led to believe that preferential voting is compulsory in some states and in some elections, and that if you refuse to number all boxes your vote will not be counted at all, is this not correct?

    • Ren Stimpy 2 years ago

      Ah yes the Greens – 10% of the vote but only 1% who (admirably like yourself) live the way they vote. Yet totally impractical for a nation of 24 million.

      • MaxG 2 years ago

        I came across a lot of people who — when ask whether they would vote green — said things like ‘you can’t for for them’, ‘unelectable’, and other negative stuff; yet, I was unable to elicit a more qualifying response as to why this (as I see it) ‘hatred’ exists so profoundly.
        So, I invite whoever dares to tell me, why they’d never vote green… a simple learning exercise for me.

        • Ren Stimpy 2 years ago

          ‘Hatred’ – get on with you. No.

          Impracticality is more like it.

          • Peter Campbell 2 years ago

            Impractical things like wanting to actually do our share of keeping the planet liveable? Preferring orthodox market-based solutions such as cap and trade emissions trading, over picking winners (or losers in the case of the many of the COALition)? Is that the sort of ‘impracticality’ you mean?

          • Ren Stimpy 2 years ago

            No, those things are practical.

          • Craig Allen 2 years ago

            You are being disingenuous. Neither the Greens party or their supporters want everyone to go off-grid let alone think those that don’t are terrorists. Much of what people think or claim they don’t like about the Greens is straw man rubbish that in no way reflects actual Greens policy.

          • Ren Stimpy 2 years ago

            So why are various unqualified people speaking for that impractical end point on behalf of the Greens on these fora?

            I am being disingenuous? Yo mama!

      • Joe 2 years ago

        I read the to and fro posts below and you mention and hint ‘impractical’ a number of times. What is it about the Greens that makes you say ‘impractical’? If advocating for looking after the planet and living sustainably isn’t just plain common sense (let alone a policy platform) then we have a serious problem that future generations will say what the hell were they thinking. A number of Green policies have been nicked by Labor eg Negative Gearing, Share Franking Credits and some Greens policies have actually become reality eg Banking Royal Commission, Marriage Equality, Getting Asylum Seekers off island detention camps. I think the evidence is there to show that The Greens are very practical and very relevant.

        • Ren Stimpy 2 years ago

          The perception is that they should be a party for the environment (maybe because the name “Greens”) but none of those issues you listed are even remotely related to the environment. The antics of the NSW senator haven’t helped. The Greens’ senate vote in NSW was 7.41%

          I’d suggest they campaign on environmental issues only like climate, the reef, deforestation, land clearing, Murray Darling, fracking, etc. Or change their name.

          • Joe 2 years ago

            The name of a party does not absolutely define what a party stands for. Sure the name/s come from their original formation but over time parties evolve and stand for multiple issues / policies. Labor, Nationals ( changed name from ‘Country Party’ ) and Liberal Party have all followed a path of evolution. The Greens champion the environment ( always their number 1 priority ) and rightly so. The Greens are not a single issue party and haven’t been for as long as I can remember. Anyone who perceives The Greens are only about environmental matters should check The Greens website to see that a whole lot of issues are important to The Greens.

          • Ren Stimpy 2 years ago

            Well as they say, you can lead a horse to water…

            “the environment ( always their number 1 priority )” ? That’s a good laugh.

  2. TW 2 years ago

    The only way to bring down prices is to alter the bidding rules and pricing rules. Only one bid per day per generating unit should be allowed and that is what the generator gets paid for all the energy generated that day. the concept that all generators get paid what the most expensive generator bids is and always has been a rip off. The generators are hooked on getting super profits based on shortage of supply and bad weather. Long term bidding forces more realistic prices. And, yes, before people start yelling, a “bid” will include a price for being available, a price for starting, a price for stopping and a price for low load.

    • Ren Stimpy 2 years ago

      I agree it has to change, and your ideas are part of starting of the process, if not what they will eventually go with.

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