The states have given the National Energy Guarantee (NEG) an ‘amber light’, but questions remain over whether it will deliver the emissions reductions needed to meet Paris commitments, and what mechanisms it will use to deliver reliable power.
The Council of Australian Governments (COAG) Energy Council recentlygave the go-ahead to the Energy Security Board (ESB) to progress to the next stage in the NEG’s development – the design of detailed legislation to be presented to COAG in August.
This follows the ESB’s high-level design document, which was produced after a call for public submissions that received more than 150 responses.
According to the executive summary of the document, “the Guarantee will provide a clear investment signal, so the cleanest, cheapest and most reliable generation (or demand response) gets built in the right place at the right time”.
The ESB has projected the NEG could slash $100 to $115 per year from electricity bills for the average household. In an interview earlier this month, ESB Chair Dr Kerry Schott reiterated her belief that the policy would bring prices down.
But Queensland Energy Minister Anthony Lynham told the Guardian before last week’s COAG meeting that he needs “concrete evidence” that the NEG will cut retail costs, as the ESB released their projections before undertaking any detailed analysis.
How will it keep the lights on?
The NEG was devised as a means to ensure a reliable supply of power while meeting emissions reduction targets and reducing costs, after the federal government rejected Chief Scientist Alan Finkel’s Clean Energy Target.
According to Schott, keeping the lights on is the key target of the NEG (more so than reducing emissions).
But Mark Lendich, the chair of Engineers Australia’s (EA) Electrical College, said the policy’s high-level design does little to clarify how this will be achieved, with many technical aspects being left to the next stage of consultation.
In particular, Lendich said it was still unclear how the ESB would define dispatchable capacity, and the document makes no mention of how interconnectors would be used to address reliability gaps. He also said the high-level design does not address technology and performance standards.
“There’s still a lot of work to be done and I thought – given the extensive feedback received – they would have been further along the track by now,” Lendich said.
However, Lendich sees light at the end of the tunnel in the inclusion of the Australian Energy Market Operator (AEMO) as a “procurer of last resort”, who will come to the rescue if all else fails.
“If the market doesn’t work, there’s still a safety net,” he said.
Passing the emissions buck
Schott told the ABC she is very confident that Australia will meet its emissions targets to 2030. She said that between 2030 and 2050, we will need to do more to meet higher emissions reduction targets, but we will be aided by advances in technology such as battery storage.
However, Victorian Energy Minister Lily D’Ambrosio has suggested the NEG’s emissions reduction target of 26 per cent will unfairly transfer the load of meeting Paris Agreement commitments to other sectors.
“Will it be farmers, or the transport sector or manufacturing?,” D’Ambrosio asked in an interview with the Guardian.
According to Engineers Australia’s Energy Security Spokesperson Neil Greet, the government is working on emission reductions in transport fuels, but it might not happen in time to meet our Paris Agreement commitments.
“It seems that we could be passing the emissions reduction target from an industry that could do more to others that have less capacity for extra reductions,” Greet said.
The NEG should take into account the future pressures of a transport industry transitioning from liquid fuel to electric and hydrogen cell propulsion, Greet said.
“If it doesn’t take into consideration the future pressures of the transport industry, we won’t have an NEG that delivers affordable, reliable power for future generations,” he said.
“The relationship of hydrogen cells to the grid also needs to be thought through. We aren’t going to be able to produce [hydrogen] by magic.”
Greet added that the ESB’s focus on reliability over emissions is not ideal.
“This is a multidimensional problem, and if you only address one part you repeat the problems of the past. At face value it reads okay, but it’s not good enough,” he said.
Engineering and economics vs ideology and politics
According to Federal Energy Minister Josh Frydenberg, the Turnbull government’s energy policy is based on engineering and economics, not ideology.
Greet agreed that design of the NEG is based in engineering and economics, but said its negotiation is all about politics and ideology. He emphasised that engineers need to have a voice early in the process to ensure that the NEG provides a robust framework to transition to a reliable, affordable, low emissions energy sector.
“Engineers and scientists don’t need to be in control, but we need to have a voice during the public phase of the negotiations,” Greet said.
Lendich concurred, and said engineers should take a more “up-front” approach in providing input on energy policy.
“Submissions are important, but direct stakeholder management and engagement are needed too,” he said.