Australia's Experts Weigh In On Turnbull's National Energy Guarantee

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In the wake of the Coalition deciding to scrap Dr Alan Finkel's proposed Clean Energy Target, Turnbull announced its replacement will be something called the National Energy Guarantee. How is this different to the CET, and will it still be able to have the needed impact on Australia's carbon emissions to reach our Paris climate target? We got in touch with some of Australia's leading experts to decipher Turnbull's NEG.

To start off, here is the statement released by Australia's Chief Scientist, Dr Alan Finkel himself:

Dr Alan Finkel, Australian Chief Scientist

"1) The electricity Review that I chaired proposed an orderly transition (Recommendation 3.2) to achieve the key outcomes of increasing security and reliability, affordability and lowering emissions. I am pleased that the Australian Government asked the Energy Security Board to provide advice on this matter.

"The Energy Security Board was one of the key recommendations from our Review. Consisting of the energy market regulators and an independent Chair and Deputy Chair, it is the country’s most authoritative voice in energy matters.

"2) I know from consultations with the Energy Security Board in the later stages of the development of the new proposals that the process was thorough.

"3) The orderly transition proposed in our Review consists of three parts.

"First, an agreement by Commonwealth, State and Territory governments to an emissions reduction trajectory for the National Electricity Market.

"Second, a credible mechanism to enable the regulators to ensure that new low emissions energy enters the market. We compared a number of mechanisms and concluded that, on balance, of those we analysed the Clean Energy Target mechanism was preferred. However, other mechanisms could be used by the regulators to achieve the same goal. The Government’s commitment to a retailer obligation for low emissions energy under the National Energy Guarantee appears to be a credible mechanism.

"Third, a requirement that entry of new low emissions generation should occur in the context of a Generator Reliability Obligation for new generators (Recommendation 3.3). The Government’s National Energy Guarantee imposes an equivalent obligation on retailers to ensure the reliability of the electricity system is preserved as new low emissions generation enters.

"4) Success of the proposed emissions and reliability guarantees in the National Energy Guarantee will depend on extensive consultation by the Energy Security Board with all market participants.

"5) Given that the existing operation of the National Electricity Market is managed by the Council of Australian Governments (COAG) through the National Electricity Laws, it is appropriate that the integration of the entry of new low emissions generation into the market is managed through the same laws.

With the adoption of a process for an orderly transition, Australia will be able to strategically manage its electricity supply for maximum benefit."

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Professor Ken Baldwin, Director, ANU Energy Change Institute

"The National Energy Guarantee has thrown the electricity sector into more policy turmoil by putting in jeopardy a bipartisan approach to energy and climate policy. By removing the Clean Energy Target it fails the technology neutrality test because it does not impose the true cost of greenhouse gas emissions on fossil fuel generation.

"Further, it is not clear whether the NEG can do the heavy lifting for the rest of the economy that will be needed to meet our Paris targets. Inevitably carbon pricing will be adopted around the world, and only when a future Australian government aligns with this will the energy industry find the policy certainty needed to unlock the logjam in renewable energy investment."

Professor Andrew Blakers, ANU College of Engineering and Computer Science

"The cheapest way to meet the Paris emissions target is by increasing the renewable energy share of electricity to 50 per cent.

"As the Prime Minister points out, pumped hydro storage (including Snowy 2.0) is highly effective and cost competitive. Pumped hydro can be built fast enough to stabilise any amount of solar and wind at lower overall cost than any fossil fuel alternative."

Dr Matthew Stocks, Research School of Engineering

"Electricity is the easiest and cheapest sector to reduce our carbon emissions. However, electricity generators operate for decades and require long-term certainty to reduce risk and promote development.

"Australia needs a bipartisan approach to develop a stable energy policy, as we saw at the introduction of the renewable energy target, to give the industry the confidence to plan for the future."

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Professor Tom Faunce, ANU College of Law & Medical School

"Nations with stable incentives for investment in the renewable energy sector will see growth in their economies and in employment rates. Coal-fired power stations and fracking pollute the environment and create fewer new jobs than a booming renewable energy sector. If Australia doesn’t create a stable platform for renewable investment it will be left behind in the race for next generation clean energy technologies."

Professor Llewelyn Hughes, ANU Crawford School of Public Policy

"Any energy policy has to meet two conditions: first to create a stable platform that gives business the confidence to invest in long-lasting energy infrastructure. Second to ensure this platform is consistent with Australia’s global climate obligations. The government's challenge is to build a bipartisan consensus that meets these conditions, something it has failed to do as yet."

Professor Elmars Krausz, Research School of Chemistry

"Our Paris Agreement is for a reduction at a date which is beyond the term of the current government. Abandoning the clean energy target leaves no clear mechanism whereby the Paris Agreement reduction can be achieved."

Professor Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law at Deakin Law School

"The decision to abandon the Clean Energy Target proposed by the Finkel review and adopt a new energy plan, as recommended by the new Energy Security Board, grounded in the twin objectives of reliability and affordability rather than emission reduction is retrograde and inconsistent with the global shift towards renewable energy production. The proposed plan misconceives the true meaning of energy security.

"In a modern world, energy security is not just about reliability and affordability. It is also about sustainability. It has to be. The well being of future generations depends upon it. The production of energy is one of the highest sources of greenhouse gas emissions. Climate change imperatives are driving decarbonisation across the globe.

"Supporting the transition to less carbon intensive energy production is a critical component in this process. Market mechanisms, including the RET and the CET support this transition because the commercial competitiveness of renewable energy continues to be impacted by their comparative cost to fossil fuel energies.

"Two market distortions affect this: first, subsidy preference in Australia for fossil fuels and second, the externalisation of environmental and ecological costs of fossil fuel production. The aim of the CET was to further support a transition to cleaner energy production by promoting stronger market change into the future.

"Abandoning the CET on the basis of affordability and reliability ignores the fundamental importance, as articulated by the Finkel report, in promoting market and behavioural shift towards a cleaner and more sustainable energy future."

Kylie Walker, CEO at Science & Technology Australia

"The continued focus on meeting our emission reduction commitments is heartening, and we hope that the process of reaching these is transparent.

"The security and stability of Australia’s power supply is paramount, not just now, but well into the future.

"We must strike a balance between short-term reliability and applying the best science-informed evidence and new technology to find a strong and sustainable approach to meeting our growing power needs into the future.

"Investing in and supporting the establishment of renewable and sustainable sources of energy across the nation will future-proof the Australian energy system, as well as supporting global goals to address the impacts of atmospheric pollution."

Paul Burke, Fellow, Crawford School of Public Policy, ANU

"The announced national energy guarantee has potential, with much depending on how the emissions and reliability mechanisms are calibrated.

"The emissions guarantee is an emissions intensity scheme. It would need to be set ambitiously if it is going to help us achieve a relatively rapid move to a low-carbon electricity system.

"The reliability guarantee could help to encourage investment in energy storage and other dispatchable energy capacity. We would run into high costs, however, if electricity retailers were mandated to maintain too much in the way of dispatchable capacity.

"A key feature of the proposal is the ability for retailers to contract among one another to make up for any shortfalls in their own electricity portfolios. This adds flexibility to how compliance can be achieved.

"It is likely that renewables plus pumped hydro and battery technologies will be at the heart of our future electricity system. The government’s proposal, if well calibrated, could help to facilitate a transition to this system of the future.

"Australia has pursued many ideas for policies to reduce emissions. Economists typically recommend a simple carbon price, an approach that has a lot of attractive features. But the government's proposed approach for the electricity sector is one that also has potential. Questions remain over how emissions reductions will be achieved in other key sectors of the economy."

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