Coalition abandons CET for National Energy Guarantee

The Federal Government has abandoned the Clean Energy Target in favour of a National Energy Guarantee (NEG), which requires retailers to use a percentage of electricity from 'dispatchable sources' such as coal and gas, batteries or pumped hydro. Subsidies and incentives for renewable energy sources are expected to be scrapped from 2020.

The Prime Minister, Malcolm Turnbull, said in a statement that the NEG would be made up of two parts:

  • A reliability guarantee set to deliver the right level of dispatchable energy (from ready-to-use sources such as coal, gas, pumped hydro and batteries) needed in each state. It will be set by the Australian Energy Market Commission (AEMC) and Australian Energy Market Operator (AEMO).

  • An emissions guarantee to contribute to Australia’s international commitments. The level of the guarantee will be determined by the Commonwealth and enforced by the Australian Energy Regulator (AER).

The Clean Energy Target proposed by the Chief Scientist Alan Finkel would have required electricity companies to provide a set percentage of their power from low emissions technology such as renewables and efficient gas. It was regarded by industry as an important factor in creating an investable environment for renewable energy infrastructure.

The NEG scheme will include an energy intensity calculation that is intended to influence retailers to buy power that ensures Australia is on target to meet its commitment under the Paris Agreement to reduce emissions by 26 to 28 per cent below 2005 levels by 2030. .

With few details of the system yet available – the mandated level of dispatchable energy, the trajectory required of retailers to meet missions targets, and penalties for companies that fail to meet the terms of the NEG – and no modelling yet done on how the government's prediction that savings for householders of $110 - $115 per year by 2030 might be achieved, the policy still has a long way to go.

It will need support from the ALP to legislate a target for the electricity sector of a 26 per cent reduction in emissions on 2005 levels by 2030, and from the states in order to change the electricity rules. South Australia, Victoria and Queensland, which have all invested heavily in a renewable future, stand to be disadvantaged by the NEG.

The South Australian Premier, Jay Weatherall, has attacked the policy, calling it a "complete victory for the coal industry". Queensland Energy Minister Mark Bailey has suggested his state could “go it alone” with its target of 50 per cent renewable energy, while Victorian Energy Minister Lily D'Ambrosio said the Turnbull government had no analysis to back its claims of household power bill savings. Western Australia and the Northern Territory are not affected as the plan only applies to the National Electricity Market.

The policy will be discussed at the next COAG meeting of state energy ministers in November.

Labor spokesman Mark Butler says the government should be more ambitious in seeking 50 per cent of production from renewables by 2030.

Industry commentators have stated that following a ten-year vacuum in energy policy, any policy that offered a stable bi-partisan investment environment would be welcome.

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