Australia’s national electricity policy moves forward, but roadblocks remain

It was always somewhat of an artificial deadline: The meeting today in Sydney of the state and federal energy ministers was meant to be make-or-break for the proposed National Energy Guarantee policy. The outcome, it appears, is that there are serious cracks in the policy, but that it is holding together.

The National Energy Guarantee (NEG) has been proposed by the Federal Government, as the policy under which new large-scale electricity generation assets are to be developed post 2020. The policy sets an unambitious 26% emissions reduction target by 2030, and has been heavily criticized by more renewables-friendly Labor state governments.

After today’s meeting, the Australian Energy Security Board, which has stewardship of the NEG, noted that while “there’s still more work to do” that the drafting of the legislation will begin after another Energy Council teleconference next week.

“The decision today is an important and positive one, and means we remain on track to get the Guarantee in place within the implementation window,” said ESB Chair, Kerry Schott in a statement. The ESB indicated it will continue consulting with the states and stakeholders in the formulation of legislation, particularly as it pertains to the reliability mechanism.

“Developing a mechanism that can integrate energy and climate policy is a big task, and the result today reflects the effort, input and good will of stakeholders from across the energy sector and the community,” said Schott.

Federal Energy Minister Josh Frydenburg put out a statement saying that the NEG has “moved one step closer” as a result of the discussions. The statement said that agreement had been reached to release draft legislation after a phone hookup next Tuesday, August 14, notably after it is debated at a meeting of the Federal Liberal party room.

This appears to be a considerable concession from Frydenburg, as it is in line with the Victorian Labor Government's demand that the NEG pass his own Liberal party room, before further consideration by the states. That the NEG passes party room discussions intact remains in doubt, as prominent Federal Government backbenchers, including former Prime Minister Tony Abbott, continued speaking out against the NEG in the lead up to today’s Energy Council meeting.

Pushing for a better deal

In contrast to the positive signals from the ESB and Frydenburg, Labor states remained reluctant about the NEG mechanism and called for more work on the proposed energy deal.

The southern state of Victoria says it has withheld its support of the NEG until it supports lower bills, lower emissions and more renewable energy jobs, thus thwarting the approval of the NEG at today’s Energy Council meeting.

State energy minister Lily D’Ambrosio said Victoria had moved with “other jurisdictions“, and reiterated the state’s list of conditions, announced earlier this week, to sign up to the proposed NEG.

“The National Energy Guarantee needs more work and we have always been clear – we won’t sign up to any scheme that threatens Victoria’s renewable energy industry and the thousands of jobs it’s creating in our state,” said D’Ambrosio.

Victoria has, however, received assurance that one of its requirements relating to the transparency of the registry will be met and relevant state regulators will have access to the registry to perform their functions.

But, its other three demands referring to emissions reduction targets that should be only allowed to rise, not fall; that future targets that should be set by regulation, and that the targets that must be set every three years, three years in advance, have remained unaddressed.

“We’ll continue to seek improvements to the NEG and carefully consider whatever comes out of Malcolm Turnbull’s party room,” said D’Ambrossio.

Queensland has also expressed its concerns about the NEG at the meeting, which largely align with those of Victoria, relating to the inadequacy of the 26% emissions target, which should not be able to decrease, but rather increase as technology changes. Both Queensland and Victoria have Labor state governments.

State Minister for Natural Resources, Mines and Energy Cameron Dick said that Queensland is pleased that Minister Frydenberg has accepted Queensland’s position that Federal legislation needs to go through the Federal Liberal party room first.

This is expected to be the greatest test for the proposed policy, with signs of little party agreement emerging earlier this week.

“The Coalition [both Liberal and National] party room is the biggest risk to energy and price stability – and has been for ten years – so we need that party room certainty,” said Dick.

The ACT has also declined to endorse the NEG in principle, but has agreed to keep working on the scheme.

“We’d be doing everyone a disservice to accept a NEG that doesn’t genuinely address affordability, the climate change, or reliability. Until the concerns can be addressed, the Commonwealth stands in the way of real progress,” Australian Capital Territory (ACT) Energy Minister Shane Rattenbury tweeted.

A “massive win”

The Smart Energy Council, which has been strident in its opposition to the NEG as it stands, praised Victoria for its “strong statement”, adding that requiring detailed legislation to be made public before states sign off is “exactly the right strategy.”

“The Smart Energy Council calls on all State and Territory Governments to hold the line, unpack the detail, set out their own ‘red line’ conditions, and not be bullied into passing the NEG, which remains, in its current form a dud policy,” said Smart Energy Council CEO John Grimes, in a statement.

Independent modelling of the NEG suggests that if the policy is adopted with a 26% emissions reduction target that little-to-no large scale renewables will be added to Australia’s grids between 2020 and 2030.