Australian news, and some related international items

Turnbull govt – dumping clean energy target for “national energy guarantee”

Turnbull dumps clean energy target for “national energy guarantee”, REneweconomy, By Giles Parkinson on 17 October 2017 (note: This story updates a previous article, based on the release of further policy details).

Well, looks like he has actually done it. The Turnbull government has formally abandoned the idea of a Clean Energy Target, proposed by chief scientist Alan Finkel and endorsed by nearly everyone, in favour of a new policy that will protect fossil fuel generation and slow down the uptake of renewable energy.

The new National Energy Guarantee marks a major switch in government policy – at least on the face of it. But the major problem is, we just don’t know because there are so few details.

But it appears to hand extraordinary market power to the country’s big utilities and fossil fuel generators, and gives no obvious incentive to introduce new generation, which one would expect would be the key to lowering prices.

Dumped is any form of visible subsidy scheme – be it a renewable energy target, or carbon price, or clean energy mechanism – in favour of changes to energy market rules that put an additional burden on retailers for a “reliability guarantee” and an “emissions guarantee.”

But these guarantees can also be traded – in the form of contracts between utilities. Potentially, it will generate credits in dirty energy, as this table  above [on original]  illustrates.

Quite how this works is not clear, and energy participants were struggling to get their heads around it. They may struggle for a while, because the levels of these reliability and emissions guarantees have not been set, and the reliability settings will vary from state to state, depending on their level of wind and solar.

Western Australia, for instance, has been ignored and is not part of the plan, because it only applies to the National Electricity Market, which excludes WA.

It appears to allow enormous discretion on the part of the Australian Energy Market Operator and the Australian Energy Market Commission. Some described it as an emissions intensity scheme in disguise, but couldn’t be sure because of the lack of detail.

It also appears that retailers may be able to satisfy their emissions guarantee through international carbon markets. One thing is certain, the Turnbull government has undertaken not to go any further than its current Paris target of a 26-28 per cent reduction by 2030, and that is a blow to renewables.

This appears to be the minimum demand of the Coalition’s right wing, and is in effect an abrogation of the Paris climate treaty, which is to make all efforts to keep global warming well below 2°C.

The impact on the renewable sector is hard to predict, but it is clearly not good. Modelling for the government suggests that the share of renewables in total generation will be 28-36 per cent by 2030 – and the level of wind and solar 18-24 per cent.

This compares to a level of 42 per cent suggested by Finkel, Labor’s 50 per cent target, and the 70 per cent deemed necessary if Australia was to get serious about meeting the international 2°C target.

This new modelling represents only a modest increase in renewables, and possibly a virtual stop, particularly if it includes behind the meter rooftop solar, which it appears to do. If it does represent some sort of target, then it could likely bring new large-scale development of wind and solar to a halt…….

The fact that this proposal comes from the Energy Security Board also raises some questions. Finkel took nearly a year to put together his review and his painstaking modelling of a clean energy target.

The ESB, chaired by Kerry Schott, and including the heads of the AEMC, AEMO and the AER, was formed less than two months ago and only had its first meeting four weeks ago.

Little wonder that the details are so vague. Apparently it was delivered to the government last week. Investors may be mindful of Schott’s comments a few weeks ago: harnessing demand management in Australia, means “we can all stop worrying about building new plants of any description.”

The other issue about the ESB is that it is required only to look at the issue of energy security, not emissions. It appears to have been given the arbitrary number of electricity accounting for one-third of anticipated emission reductions by 2030. Who is going to do the rest?

But the involvement of the ESB has provided Turnbull with an element of political cover, saying that he was “relying on the experts”. Indeed, at the press conference, he refused to answer any question in detail, deferring instead to the members of the ESB.

Minutes later, in question time, it was obvious that the political rhetoric hadn’t changed. Quoting complete nonsense from The Australian and other conservative commentators, Turnbull claimed that the renewable energy target would cost $66 billion in renewable energy certificates, a cost imposed on consumers.

It’s rubbish, of course. Most new projects ascribe no value at all to those renewable energy certificates.

And it is this that raises concerns. The conditions of the right wing rump of the Coalition, which have been holding the government, and the nation, hostage to their demands, were laid clear by Craig Kelly, the climate change science denier who acts as chair of the Coalition’s environmental committee.

Kelly says the target must not allow renewables to get near 50 per cent, and must not go further than the 26-28 per cent committed by the Abbott government, and certainly not the 45 per cent emission cuts recommended by the Climate Change Authority, and other climate scientists, and endorsed by Labor.

In other words, it wants Australia to tear up its Paris climate commitment to keep global warming well below 2°C, and possibly as low as 1.5°C……

market power remains with the big generators – the very ones that have been dudding consumers on retail and wholesale costs for the last few years. The ESB modelling effectively locks in the recent high prices, offering only an 8-10 per cent fall over the next decade.

The ESB says this may translate into consumer savings of some $100 a year – over a 10-year period – over and above the Finkel Review. But it is not clear how if the wholesale savings are so small…….

October 18, 2017 - Posted by | AUSTRALIA - NATIONAL, energy

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