New analysis shows NEG is worse than doing nothing

New modelling by energy market analysts RepuTex has added to the deepening concern about the proposed National Energy Guarantee, suggesting it is calibrated to achieve an outcome that is worse than doing nothing.

The RepuTex analysis builds on concerns that the modelling used to underpin support for the NEG made a complete hash of estimating what would happen if no policy was in place.

It finds that the “do nothing” scenario still results in a 29 per cent cut in emissions by 2030 – more than the 19 per cent assumed by the Energy Security Board and more than the 26 per cent targeted under the NEG.

That means that the NEG would provide no incentive for any new investment in renewable energy.

Reputex says the analysis commissioned by ESB ignored two key schemes.

One was rooftop solar, and the SRES scheme that supports it. Rooftop solar is currently being installed at record rates of more than 1GW a year as households and businesses respond to soaring grid prices.

And it also appears to have ignored – apart from some initial auctions already in place – the legislated 40 per cent renewable energy target in Victoria by 2025, and the 50 per cent target in Queensland by 2030.

That amounts to a total of 8GW of capacity that has been effectively ignored by the ESB analysis.

It means that the ESB’s claims that the NEG would lift investment in renewables to 36 per cent of total production from 31 per cent under business as usual are wrong.

Reputex says business as usual would be 40 per cent.

Perhaps the only explanation for the Coalition’s omission of this capacity is their assumption that the state-based schemes will be repealed, as it and ESB chair Kerry Schott are calling for, and that the SRES will be dumped or scaled back.

In the same way, the renewables that the ESB forgot would contribute to emissions from Australia’s electricity sector falling around 29 per cent in the “do nothing” scenario – because of the state schemes and the uptake of rooftop solar.

The NEG is designed to achieved a reduction of 26 per cent. It claimed the do-nothing scenario would result in only a 19 per cent fall in emissions from the electricity sector.

“This raises questions over the design of the NEG, with a ‘do nothing’ scenario already projected to be more ambitious than the government’s emissions target, rendering the new policy immaterial to the market,” Reputex says in its report.

“Unless the target is more ambitious than where emissions are projected to be without the NEG, there is little need for the administrative complexity of the scheme”, Reputex says.

It says that if state-based scheme continue – contrary to the wishes of the Coalition government and the ESB chair – then an “arms race” between the states for renewable investment would take place. NSW, which has no state-based target, risks being left behind.