As the federal government attempts to land the National Energy Guarantee, politics is yet again proving to be the biggest stumbling block to long-term energy certainty.
As the economics of clean energy improve, the clean energy industry no longer needs the same level of subsidies, but it does need long-term certainty. The government is attempting to provide this with the National Energy Guarantee (NEG), but the chaotic politics around energy continue to frustrate its efforts to lock in a long-term national energy policy.
The Clean Energy Council is disappointed with the government’s current emissions reduction target of 26 per cent. Such a low target means that future investment in clean energy would be reliant on state initiatives, corporate power purchase agreements and improving economics of clean energy solutions relative to wholesale energy prices. Only a well-designed NEG that has a materially higher target and doesn’t allow the use of carbon offsets would drive new investment in parallel with these other drivers. This would of course require a NEG that allows for the emissions reduction target to be easily ramped up.
However, the underwhelming emissions reduction target is still too high for a number of conservative MPs, who are now openly arguing against the NEG, agitating for Australia to withdraw from the Paris Agreement and calling on the government to fund new coal generation. Prime Minister Malcolm Turnbull and Environment and Energy Minister Josh Frydenberg have so far stared down these distractions.
While all of this is going on, Minister Frydenberg is trying to negotiate the finer details of the NEG with the states and territories ahead of the COAG Energy Council meeting on 10 August. The Minister needs all of the states and territories in the National Electricity Market to commit to the policy for it to be approved, which puts him in the extremely difficult position of having to placate the conservatives within his own party while still ensuring that the states and territories remain supportive of the policy. The Minister has so far managed to successfully walk this tightrope, but there is still some way to go before he and the NEG are on safe ground.
Beyond the political considerations, there are many other complex issues deep within the NEG architecture being considered and designed at the moment by the Energy Security Board. Some of these include:
While these issues are far more technical than the political machinations around the NEG, they are no less important to the delivery of a policy that will provide us with the certainty that we need to continue the transition to a clean energy future.