The Turnbull government’s pursuit of a National Energy Guarantee as its major climate and energy policy initiative has hit more hurdles, this time from a group of 10 energy retailers who say it designed to fix a problem that doesn’t exist.
The NEG proposes to combine an emissions obligation and a reliability obligation, but the details are scant and most participants and observers have complained that the proposals are either hopeless inadequate (emissions), or not needed (reliability).
“There is currently no forecast reliability gap,” the 10 retailers say in a joint letter accompanying their joint submission. They include ERM (ranked fourth biggest on volume), Click Energy, Energy Locals, Gloried and BlueNRG, among others.
“Technology is likely to make today’s issues moot within five years. We need to proceed with caution to avoid making significant, costly changes that have dire consequences.”
Specifically, they repeated their warnings made at the recent open forum held by the Energy Security Boar that the NEG could result in costly “gold plating” of energy infrastructure, in the same way that gold plating added billions to the cost of network assets.
They also say that the NEG could invest even more power on the major “gen-tailers” that dominate the wholesale electricity market, making it near impossible for them to grow in any meaningful way.
It must not create major market disruption, undermine competition, damage market liquidity and price transparency, all of which will add more cost to already-burdened energy consumers.
“The current proposal to place obligations on retailers is perverse,” they write. “To hold retailers responsible for generator reliability, emissions and investment is mis-placed risk that poses a range of market implications.”
They warn that the NEG must not create major market disruption, must not undermine competition, damage market liquidity and price transparency … “all of which will add more cost to already-burdened energy consumers.”
The question of reliability is an important one. The Turnbull government has welcomed the NEG because its political rhetoric is based on its line that more wind and solar threatens the stability of the grid. It has rubbished state and federal Labor proposals to aim for 50 per cent renewables or more.
But most analysis makes a nonsense of the Turnbull government claims. A Climate Council report notes that most (97 per cent) of outages are caused by failure in the distributed networks, which are not addressed by the NEG.
Reports from the CSIRO, the networks lobby, and by the Australian Council of Learned Academies (commissions by Dr Alan Finkel), have pointed to the fact that Australia can observe significantly more wind and solar without running into reliability issues, if properly managed.
The 10 retailers say that a simple, more direct and lower-cost approach is to replace the retailer obligations with good forecasts and targets which provide signals to the market on what and where to invest.
This would be backed by a safety net (procurement of last resort) which allows the market to respond prior to any centralised procurement. “Our proposal addresses the fact that loss of market liquidity and market power abuse are greater risks than is the risk of over-build,” they say.
Submissions to the NEG closed this week, and the ESB has just a few weeks to present its “high level” plan to the COAG energy ministers, hoping to seek approval to further develop the NEG and introduce legislation later this year.NEG joint submission CEOs letter 080318
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.