We’re here to listen, says ESB. But not to you

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Students gatecrash Energy Security Board forum on National Energy Guarantee. But the promise to “listen” was only extended to industry participants, and even they warned about reduced competition and higher prices likely caused by an overly complex policy.

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The Energy Security Board’s efforts to consult on the controversial and highly complex National Energy Guarantee got off to a bad start on Monday, when student protestors gate-crashed a public forum in Sydney, and major energy players questioned one of the major pillars of the NEG.

“We’re here to listen,” ESB chair Kerry Schott told the 150 people in attendance in Sydney and the 500 or so linked through the live webinar.

But that resolve was quickly tested when six people from the Australian Student Environment Network interrupted proceedings, arriving on stage with a megaphone and a banner, reading “Don’t reNEG on clean energy.”

Almost immediately, the audio for the webinar was removed, and the webinar suspended a few moments later.

It was as though the participants shouldn’t be exposed to such thoughts, and added to the frustrations of many in the webinar audience who had dialled in only to be told that no questions would be taken. So much for listening.

It was bad optics – and audio – from the ESB, particularly given that the NEG is widely perceived as a mechanism dreamed up by an inner core to try to fill in the policy gap that has been left open by a Coalition government that has refused all previous policy options on climate and energy.

The chief criticism of the NEG is that it is an apology for the inaction of the federal government, and a means of kicking the can of energy and climate policy down the road.

It’s not good enough to dismiss it out of hand, to pretend it didn’t happen, or as Schott described it: “Don’t you wish you were at university again.” Doesn’t everyone wish that policy makers and industry groups had a passion for something other than their own vested interest?

The perception is that the NEG is a members-only consultation, and this was only enhanced by the “participants” that had been invited by the ESB to talk to the event, the people they had agreed to listen to.

They included:

  • Large retailers – Origin, Snowy Hydro, Engie/Simply Energy, ERM, Alinta, and new retailer Powershop;
  • Lobby groups and industry bodies like the Minerals Council of Australia and the Clean Energy Council;
  • Financial institutions such as Macquarie Group and the Australian Stock Exchange;
  • Consumer groups such as St Vincent de Paul, Energy Consumers Australia, and the Energy Users Association;
  • And a sole representative of “new technologies”, the world’s largest supplier of “demand response”, EnerNoc.

They only got about 5 minutes each to speak to the audience, but the ESB would not likely be comfortable with what they heard – it confirmed the criticisms of last year that this design risks reducing competition and forcing prices up, not to mention stifling new projects.

Almost all – including, remarkably, the big retailers – took issue with one of the fundamental pillars of the policy design, the proposal to require retailers to use contracts to meet one or both of the two obligations: emissions and reliability.

We go into this in more detail here. But retailers such as Origin said it would likely reduce liquidity and so push up prices. This was echoed by most of the others, along with the bankers and the ASX.

“It’s too complicated, it would give jobs to an army of bureaucrats,” Simply Energy said. Origin Energy said the reliance on contracts was “problematic” and could “reduce liquidity”. Macquarie said it would raise barriers to new and smaller competitors.

The result of all this? Higher prices, of course (and still no decent emissions target).

“We are concerned that what we will end up with is a gold-plated market solution in the same way that we ended up with a gold-plated network,” said the Energy Users Association, which represents medium and large energy users (companies and manufacturers).

Others simply talked their books: Snowy Hydro wanted only “synchronous” generation to count for the reliability target (i.e. Snowy 2.0 and other pumped hydro, rather than battery storage).

The Minerals Council worried about the future of “baseload” and 24/7 power (i.e. coal).

They were represented by Patrick Gibbons, the former advisor to environment minister Greg Hunt whose government tore down a perfectly reasonable policy, the Labor/Greens carbon price, and tried to tear down the renewable energy target along with it.

(And we should remember that Sid Marris moved the other way, from the Minerals Council to prime minister Malcolm Turnbull’s office, where he is climate advisor. No, really).

The ESB is consulting, and wants input, but it hasn’t got much time. Its 58-page discussion paper addresses more than 60 questions, but it has only given itself four weeks to digest these before taking a “high level” plan to COAG energy ministers for approval in April.

Assuming this gets the nod, they will then go back and consult for another three months before presenting a detailed policy by August.

That process will seek to address the enormous complexity of this proposal, along with its unknown links with other policies such as day-ahead markets, emergency reserves and demand response mechanisms. What will follow is a major re-writing of the electricity rules.

One should not question the genuine interest of finding a solution by the members of the ESB. As one noted, the four better ideas (CPRS, carbon price, EIS, CET) have all been dumped and they are only dealing with fifth-best on behalf of a government that will not respect the science, or technology.

But fifth-best is a complex beast because it tries to hide the true nature of what they want to do – lower emissions. And one suspects that while they might insist that they are “listening”, they’ve already made up their mind on a number of key suggestions.

As Andrew Stock, from the Climate Council, complained:

“Four hours listening to the ESB webinar and not one invited “stakeholder” representing the environmental side of the NEG design!

“The ESB clearly isn’t listening to the community when it comes to concerns about power pollution and climate change.

“All invited stakeholder groups talked to was cost, complexity and reliability. With no serious ESB intention for any questions, this consultation process is not a patch on Finkel’s – it’s rushed, narrow,  exclusive and Sydney-centric”.

So, on this occasion, let’s give the last word to the students, who in 2040 and 2050 will be facing the impacts of whatever is decided now by politicians and the policy elite.

“The National Energy Guarantee will continue the coalition’s appalling track record of electricity price hikes, energy failures and emissions increases. In their current term, Turnbull’s Coalition government have already overseen an increase in greenhouse gas emissions and electricity prices,” they said in a statement.

“The National Energy Guarantee is based on a market model that has not worked anywhere else. It would further stall desperately needed reductions in power prices and greenhouse gases.

“It is a giant step backwards when the rest of the world and vast majority of Australians support mass investment in affordable renewable energy.”

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55 Comments
  1. Roger Franklin 9 months ago

    With some of the highest prices in the world for both connection and per kWh fees, this article seems to confirm what we all know – that prices will be “Pushed Up” as generators sign up to obligations in both the emissions and reliability areas. Well they were never going to come down…..!

    The end result – for some, grid defections based solely on the economic reality that grid supplied power is more expensive that Solar plus batteries. The rest are basically married to “The Grid” – whether it be location, house design, power usage, political beliefs (Josh and Tony – you are in this group!), plus more – most people will keep connected to the grid but watch the increase in solar and battery installs.

    To the ESB chair Kerry Schott, there is a consumer lead energy revolution underway. It appears that many are doing everything they can to hold it back – but it really won’t change the outcome, only delay it! The choice we have is whether we are a leader or a follower in this energy revolution.

    What are we missing – a picture of Josh with the words “The Grid Needs You” while Tony checks the water height at Manly!

    • Goldie444 9 months ago

      Kerry Schott is on the board of the NBN. Is she bringing the skills being used in rolling out copper for a future highly connected world, to the Australian Electricity market? OMG.

      • Roger Franklin 9 months ago

        Well that just fulls one with complete confidence!! We are in safe hands!
        Actually I think Big Mal was involved with NBN too….!

        • Joe 9 months ago

          …he still is..It is Mal’s NBN!!!!

          • MaxG 9 months ago

            why it turned to bull 🙂

      • wideEyedPupil 9 months ago

        Yep, the goto voice in defence of privatisation (of profits) and socialization of any harms.

  2. lin 9 months ago

    A report that is “rushed, narrow, exclusive and Sydney-centric”?. Our so-called “Federal” government should be very happy with it then.

  3. howardpatr 9 months ago

    There is of course the ever present lobbyist for the fossil fuel industry; John Pierce.

    Is anybody aware of him making any detailed statement concerning his his position on anthropogenic climate change?

  4. MaxG 9 months ago

    I no longer get stuck in all this nonsense — mainly stupid people, who puzzled me in the past a great deal, but since I read “The five universal laws of human stupidity” https://qz.com/967554/the-five-universal-laws-of-human-stupidity/ I feel enlightened and cured from bothering about these clowns.

    • wideEyedPupil 9 months ago

      It’s a game but one some of us turn up to play so these clowns are defeated and hung on their own rope.

      • MaxG 9 months ago

        Once you’ve seen Obama indemnifying the GFC orchestrators, you know it’s a lost cause.

        • neroden 8 months ago

          It’s not. Obama was a blatant right-wing sellout, but the number of Bernie Sanders voters shows you that the cause is alive and well.

          • MaxG 8 months ago

            I truly hope you’re right.

    • Steven Gannon 9 months ago

      Well it’s an interesting perspective, especially the bit about being able to spot a bandit. I just try not to let it rile me too much.

    • Rod 9 months ago

      I always say there are two distinct types who vote for conservative parties.
      The very rich and the very stupid. And the stupid are like turkeys voting for thanksgiving.

      • MaxG 9 months ago

        Rod, brilliant, what a nice illustration — love it.

      • neroden 8 months ago

        I would add that I think that the very rich who vote for right-wing parties are also stupid. In the long run, the best thing for the very rich and their descendants is to create a stable, happy society which will let them enjoy their riches. (As they did in England.)

        If the very rich make too many people angry — as right-wing parties are wont to do — they get the French Revolution, Russian Revolution, etc.

        The very rich who want their children to keep their heads on their shoulders should vote for moderate left-wing parties, not for right-wing idiots.

  5. Ivan Yerkinov 9 months ago

    The NEM is dead

    • Roger Franklin 9 months ago

      Ivan – would love to agree with you but I get the feeling that those involved are going to flog this for many months to come!! Based on comments from other threads – are are certainly heading into #PEAKSTUPIDITY territory!

      • Kevan Daly 9 months ago

        For many months to come! Malcolm Turnbull is going to finally announce that he’s solved the reliability/affordability/emissions trilemma and is calling an election slightly early due to COAG/Labor/Senate intransigence.

    • wideEyedPupil 9 months ago

      NEG is a delaying tactic either if it goes ahead or if it doesn’t go ahead but is continued to be talked about until the next federal election, useful for Turnbull and Frydenberg to undermine the good efforts in some of ALP the states.

      • Steven Gannon 9 months ago

        If Labor win the SA or Tasmania elections I’m guessing COAG will reject it.

        • neroden 8 months ago

          Hell, it might get rejected by Queensland or Victoria, too.

    • Rob G 9 months ago

      NEG?

      • Ivan Yerkinov 9 months ago

        Na, the NEG will kill how the NEM trades. Remove transparency, liquidity and increase costs.

  6. john 9 months ago

    Just why were the Minerals Council of Australia on the list?
    One would have to assume in the present energy producer list they represent brown and black coal.
    I would have thought that the energy producers would have been able to represent themselves.
    It is well know the Minerals Council of Australia stance where even BHPB has told them to pipe down or they will leave the organisation.

    • Joe 9 months ago

      ..sponsors of The ESB?

    • aussiearnie 9 months ago

      Interestingly when CCS was being pursued the coal industry maintained that this was not their problem and they should not have to invest in research as they only supplied the coal and did not burn it. I’d say they may have finally woken up to the fact that those burning the stuff may not be doing so for much longer…

    • wideEyedPupil 9 months ago

      Maybe John Pierce just used his Christmas Card “thank-you” list?

    • Craig Memery 9 months ago

      I think it’s fair enough Minerals Council was there… after all, they wrote all Coalition energy policy until ESB came along.

    • Tom 9 months ago

      I think the federal government gave the MCA a free ticket.

  7. Joe 9 months ago

    Memo to ESB…..’Pollution’,…’Climate Change’…what are they again?

    • wideEyedPupil 9 months ago

      There’s no “trilema” if Climate and population health are not real.

  8. Steven Gannon 9 months ago

    Fifth best? In a five-horse field maybe, and stone motherless at that. Was AGL invited? It’s heartening to see that the industry doesn’t like it.

  9. Alastair Leith 9 months ago

    Strike one for the “Problem Solver”.

    • solarguy 9 months ago

      And strike 3 not far away either.

  10. Peter Todd 9 months ago

    I don’t see the complexity problem in the NEG. Every retailer has to deliver the electricity required at the emission levels required. If they have to do that through contracts that are complex and creates costs and overheads, commercial reality will sort that out very quickly. Every stakeholder are fighting for their own self interest, which is creating lots of noise and confusion. The ESB will be judged on how well they can target Australia’s best interests. ESB don’t have much time but often great results are achieved very quickly. I want things to happen quickly. They don’t have to repeat what Finkle did. They just use his information.

    • Mike Westerman 9 months ago

      It’s complex because its two elements rely on retailers being able to verify what they are buying, whereas in reality they buy a combination of energy and financial instruments. The generators on the other hand know what they are using to produce what they are selling, and this is verified by their registration. Both emissions and security/reliably can be simply measured at source and that is where the guarantees should apply.

      • Peter Todd 9 months ago

        Yes emissions should be measured at source but reliability/security should always be measured at the output. If you don’t do that all the important bit in the middle are ignored, which is one of our current problems.

        • Mike Westerman 9 months ago

          The NEG will not include the security and reliability of the network.

          • Peter Todd 9 months ago

            Not yet but I believe it will eventually. Its current definition of reliability is very narrow. If NEG eventually flies, then to get the result that Australia needs then the reliability of the network needs to be tied in.

          • Mike Westerman 9 months ago

            I don’t see how the current formulation of it could possibly do so, as retailers cannot chose which part of the network to use to supply their customers. It just makes and unworkable proposition more unworkable. The simplest arrangements are to tax carbon at its source and for auxiliary services to include an expanded definition of services to include longer term network support services.

    • solarguy 9 months ago

      They won’t use his info.

  11. DJR96 9 months ago

    OK, can someone clarify my understanding of the current RET scheme please?
    The small scale stuff will simply expire in 2020 stopping it dead.
    The large scale trading scheme will continue to operate until 2030. I know it is a whole supply/demand thing that is supposed to determine the value of the LGCs, but what is the underlying value creation? And how is that going to change heading towards 2030? Will their value simply diminish as the proportion of renewable energy increases? And if left to continue to say 2050, would they eventually become almost worthless? As in by then they have served their purpose.

  12. Ken Dyer 9 months ago

    Don’t you just love the alphabet soup that is the Australian ‘management’ of security policy and practice. We have AEMO, AEMC, ESB and NEG. Does anybody know what they all do, or is it another political stunt to justify the appointment of rent seekers by governments to pretend they are doing something about the butchered and non existent energy policy in this country.

  13. john 9 months ago

    I can not find it but some one mentioned Lazard figures so ok I will post the figures for their 2017 LCOE of energy.
    Please look at the figures. https://uploads.disquscdn.com/images/87d0acca92e60e377eb3b803da754ffdcfe8230a0bb43e38ba1160e4c7ff7570.jpg

    • john 9 months ago

      Just click the graph or and by the way this is world wide figures not country specific

      • neroden 8 months ago

        Worth noting for those who like details…

        Lazard uses a very high cost of capital (interest rate) assumption because they have been keeping their cost of capital assumptions constant for 10 years. Which is reasonable since they want to track movements in the underlying prices.

        But as solar, wind, and batteries become more common, they are perceived as less risky, and their cost of capital goes down.

        Since solar, wind, and batteries are capital-intensive while fossil fuels are operations-intensive, the result of this is that Lazard consistently *overestimates* the price of solar/wind/batteries relative to fossil fuels.

        Solar/wind/batteries in practice have *even lower* LCOE than Lazard thinks, if you’re considered a good credit risk.

        • Mike Westerman 8 months ago

          A very important point Neroden. Clearly as WACC has fallen dramatically in many countries, the assumptions of debt at 8% and equity at 10-12% are not supported in practice. It means capital intensive, low opex technologies with long economic lives like solar and pumped hydro have high LCOE/LCOS.

  14. Grpfast 9 months ago

    This is probably extreme, but I like it. This has the makings of the disruption to the Australian Commomwealth.
    SA, Victoria, Western Australia and Tasmania? Even Queensland are moving away from the Federal LNP with no direction for a realistic future. Living in a bubble Malcolm! I’d get out now.

  15. Rod 9 months ago

    SA election in 3 weeks. If Labor get back in, no NEG. End of discussion.

  16. Les Johnston 9 months ago

    Thanks for the report. It sheds light on bad management and leadership. A forum that displays that response to an interjection says much about the forum “leadership” and its competence.

Comments are closed.