What is NEG, and what does it mean for us?
Is the NEG really the solid energy policy that it is supposed to be? Let’s explore it in a bit more detail.
In November last year, the Turnbull government announced a new energy framework, or energy policy. The National Energy Guarantee (NEG), broadly, is designed to see that Australians are provided with “more affordable and reliable electricity while meeting our international commitments.”
In other words, Australian electricity consumers are promised cheaper electricity, blackout free, while Australia still meets its Paris Agreement emission reduction targets. Critically, the policy is also designed to rid current energy markets of the lingering government energy policy uncertainty. This will provide energy companies with the policy clarity they require to confidently invest in energy infrastructure.
We’d like to say that this article will completely demystify the details of this new, complex and potentially pivotal policy. Alas, total demystification is about as likely as achieving warp speed on your tricycle. Many have tried.
However, we will introduce you to the basics, a little history and how it may affect you. Essentially, what it all means in as simple terms as possible.
Throughout the article, there are a number of links that will allow for a greater depth of understanding. In order to maintain the flow and limit distraction, the majority of links to further reading have been placed after the conclusion of this article.
This information may well be very important, folks. Get clued in. Oh, by the way for those of you already enjoying dirt cheap electricity from the sun via your solar array, well done. You have achieved a substantial amount of electricity self-determination, and higher immunity from the energy influence of the circus in Canberra.
What’s happened since the NEG was announced?
The broader objectives of the NEG have been subject to 9 months of stakeholder scrutiny, with much of it playing out in the public domain. Interest groups, lobby groups, energy policy boffins, energy academics, and of course, the media, have all weighed in with question and critique. Under the microscope, a growing consensus suggests the policy details appear arrestingly complex, and in the opinions of many an expert commentator, very flawed.
The models that demonstrate the path to the advertised objectives are tightly guarded by the conservatives. Of course they are, because the outcomes of the policy are prediction. It’s a prediction based on a set of numbers and interpreted data that we must assume is strategically filtered through coalition political imperative. Rubbery figures.
In all fairness, outcome projections of a policy with so many complicated working parts can only ever be speculative, political bias or not. Hence, there is the burning desire of stakeholders to assess the validity of claims by scrutinising the empirical data relative to the coalition’s forecast outcomes.
Much of this data scrutiny presents findings that include words like maybe, likely, could, should, on average, possibly, won’t and can’t. They’re littered throughout the critiques. Obviously, such non-committal language sits uncomfortably at odds next to an absolute such as “Guarantee.” Doubt and suspicion of coalition rubbery figures has fuelled opposition.
While there is certainly plenty of vocal opposition to the NEG, the final policy design is yet to be agreed upon. While controversial, there is still plenty of support from various stakeholders, hopeful that the necessary bipartisan support to see the policy enacted will be achieved.
Critically, the policy has cleared the coalition party room. Factions are still simmering because of fundamental difference of energy opinion, but the coalition seems in agreement on the NEG.
Importantly, without the agreement of the all states and territories, the policy will not see the light of day in its present form, or perhaps in any form. It may yet be relegated to yet another federal acronym without substance.
The ACT government is one serious objector. They’re looking to have Victoria join them in opposition. It’s also not out of the question that Queensland will also join the descent, as federal policy appears be at odds with the Sunshine State’s lofty renewables ambitions.
Greenpeace and environmental activist group GetUp are vehemently opposed to the policy. They’re advertising heavily in the Labour states in an attempt to ensure that the NEG is vetoed by the states and territories.
In summary, the roll out of the NEG policy does not appear assured, but to the consternation of many, and the hopes of others, there is a strong chance it will be enacted.
What inspired the creation of the NEG? A brief history.
A quick look at your exorbitant (and rising) electricity bills of the last several years, is certainly evidence enough that Australia has a problem with the efficient and affordable supply of electricity. Our exasperation is confounded by the fact that Australia is profoundly energy resource rich.
Political parties have been divided about the energy market problems, causes and solutions. Big energy and investment business have been made nervous because of this lack of energy policy clarity.
The states have largely taken their energy future into their own hands, while energy retailers gouge a further buck or two out of Jo Public in the confusion. And, by the way, sometimes the lights go out in certain places. Energy in Australia has become a mess.
You don’t need a science or economics degree to understand that the problem is a result of the necessary change over from lighting our nation with fossil fuels, to using renewables. The urgency of the climate dilemma, and our international emissions obligations, have thrown the proverbial cat amongst the pigeons.
It’s as if change management was a completely new concept to the government. The demands of changing from traditional forms of energy generation to a totally new, renewable energy paradigm, have seen our illustrious leaders fall into a dithering tizz.
What should be seen as opportunity has become a problem. And one needn’t look any further than our obsession with thermal coal, its convenience, and the die-hard support from certain influential industries and political factions.
It should be noted that there was a period in the 80’s that saw Australia well placed to be a global leader in solar technology. Coal took offence to the interest in “the other resource” however, and the ensuing decades saw us bow to its sensitivities and the conceit of the coal obsessed powers of the time.
In summary, the Australian energy market has become a basket case, and you’re paying for it. So too, is the environment. The NEG is Turnbull’s answer to combating the problem and setting things straight.
Prior to the NEG however, the government did what it always does in the face of a good ideas crisis. It commissioned a report. Cue Australia’s chief scientist, Alan Finkel.
The Finkel Report. How the CET morphed into the NEG. The corrosive effects of politics on wisdom
Dr Alan Finkel, Australia’s chief scientist, authored a report designed to give Canberra recommendations for a sensible way forward in view of a complex energy market problem. Finkel’s review focused on “the sustainability of the current system, its environmental impacts, and affordability for consumers.” The outcome (simplified) of the review was Finkel’s Clean Energy Target (CET).
Finkel made a priority of mandated carbon emissions targets, coupled with a viable renewables transition that involved all forms of energy generation. His focus, however, was the drive to renewables, supported by fossil fuels, with gas playing an important role.
Importantly, he suggested that electricity suppliers be forced to supply a set percentage of electricity from renewables.
Under the CET, wind and solar would enjoy continued government incentive. While this would possibly see short-term price rises in the domestic energy market, the long-term outcome would see a drop in electricity prices.
Certain members of the opposition (Abbot et al) were unhappy with this approach suggesting the reliability issue of renewable baseload power. Their influence on the eventual scrapping of CET cannot be overstated. It is reported on many fronts that ‘reliability’ is simply an excuse to add credibility to said backbench climate change denial and a preference for coal.
While taking on a great many of Finkel’s recommendations, the critical ones such as forced ambitious renewables targets and subsidised renewables were scrapped. The CET morphed into the NEG. Abbot was mollified and Turnbull could rest a little easier in his office.
Finkel’s CET was widely accepted by many experts as a sensible path forward, with many an expert commenting that the removal of politics from the issue would be an important aspect of the recommendation.
However, now that the CET is the NEG, it seems politics has become the primary driver. Rather than the CET being implemented to stabilise Australia’s energy commitments and demands, the NEG has taken its place in order to stabilise the coalition, as a first priority.
Again, cynically, though plainly true, the primary goal of the incumbent government is to maintain power, even at the cost of a good policy and effective energy management.
It’s unfair to corral all of our politicians into an energy regressive pen. Unfortunately, however, the old guard still wields considerable influence as they hang onto coal, turn their backs on accepted climate science, and cling to traditional energy structures.
In the collective voice of the frustrated, we heard, “at least something is being done.” But what is this “something?” What does it mean for us as electricity consumers?
2 Key features of the NEG that can impact you
1. Turnbull tells us our electricity bill will go down
Firstly, what bill do you pay now has ever gone down? Such a claim is already difficult to swallow. Further to this, the reduction is quoted as, “on average $110-$115 per annum over the 2020 to 2030 period. While that’s not a rise, (thanks for that), it’s hardly any reason to jump for joy. At best, this translates to around 30 cents per day. Not enough for your kids’ little lunch.
A report commissioned by Greenpeace Pacific argues the outcomes of the NEG will be price rises in electricity. As investment in renewables “falls off the cliff”, the reliance on coal and gas will be prolonged, pointing to a per MWh rise in the wholesale price of electricity.
2. Energy subsidies will be discontinued
In the normal scheme of things, letting the market decide in a free market society should be considered positive. China has already announced the winding back of solar subsidies based on the industry’s ability to compete without crutches.
It is also true that countries such as India now have a situation where investment in renewables is outstripping fossil fuel investment.
One could argue that the renewables industry in Australia is now at a point where it can compete with other forms of energy. Prices are competitive, the industry is well and truly established, and should be able to compete without a need for government subsidies.
Note we said, “In the normal scheme of things…” The counter-argument would be that our circumstances are far from normal. The reason we are transitioning to renewables in the first place is based on the evidence of rapid climate change that is projected to have catastrophic consequences left unchecked.
With such dire warnings, one might think that this is NOT the time to leave things to the market. Rather, it is time to redouble efforts to ensure a much faster transition to renewables under the leadership and support of governments.
Critics have warned that the NEG emissions targets don’t go far enough. They have also warned that there is a potential for investment in renewables to all but halt come 2020-22 under the NEG.
Moreover, critics argue that the emissions target the government has projected to meet will be met irrespectively of the NEG. Current progress via such things as rooftop solar uptake will see our Paris target met. Aussie consumers are doing all the work anyway.
The gas industry has already proven their willingness to follow the money. Much of the gas supply crisis was driven by gas companies manipulating supply to take economic advantage of favourable spot prices. They also had carte blanche to sell off the lion’s share of supply to foreign markets.
Apparently, the government has a plan to ensure energy companies can no longer “game the system.” Details of how?
While leaving energy competitiveness to the market is based on sound economic principles, we also know the market is often without principals. Ensuring renewables have a speedy, unfettered path to energy supply dominance outstrips the need of energy market equal opportunity based on level playing fields, at least at this critical juncture of transition.
It would seem fair to pose the question: Aren’t Australian electricity consumers already the victims of an unchecked energy market? Although we have renewables subsidised by the government, aren’t we already “leaving it to the market?” Gas being a prime example. It would seem that since ‘the market’ got hold of our service infrastructure, we have to pay more and more for services like telecoms and power.
“This is a very secure way of ensuring reliability, affordability and meeting our Paris commitments … it doesn’t require a CET, it works on market mechanisms and will drive prices down.” Julie Bishop.
Many beg to differ, Julie.
The NEG, a watery hybrid of the CET, is proposed to solve a litany of Aussie power supply problems. Under scrutiny, it would seem our current push for a speedy transition to renewables might be compromised in the absence of Finkel’s primary recommendations.
Proverbial brick walls in the form of politically influential climate sceptics have ensured objective analysis has had a head-on collision with political imperative. The only result we can see so far from the NEG is that there is some quiet in the coalition party room. For now.
As for solid energy policy, who knows!
While the markets and big energy investors may well be happy with the NEG definitive guidelines going forward, what about consumers?
Even if the sceptics are wrong and there are indeed price cuts in electricity, the Government estimated savings figures are little more than breadcrumbs over a decade. And at what cost?
Essentially, we get little meaningful financial relief, while the market is left to ensure the NEG weak emissions targets are met. The reported risks to renewables investment may see us halt our renewables responsibilities, putting baseload renewables generation back decades.
Take heart, electricity consumers. There is already a mechanism for taking some control of your electricity. Rooftop solar is currently providing significant relief for many an Aussie fed-up with electricity prices and ineffective government energy management.
While our Government works out our base load, you can get about creating your own rooftop solar plant in order to offset your baseload reliance. Solar is currently very cost effective and will allow you some insulation from the machinations of governments and business overwhelmed with conflicting energy agendas.