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National Energy Guarantee approved by Coalition party room

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The NEG (National Energy Guarantee) has been passed by the Coalition party room after a strenuous morning of debate – let’s take a look at what happens next. 

Next Steps For National Energy Guarantee

NEG - National Energy Guarantee
NEG – National Energy Guarantee (source: ABC News: Matt Roberts)

We wrote earlier this week about the NEG approval and how Prime Minister Malcolm Turnbull has a very hard road ahead if he’s to push this policy through parliament:

“The Labor Party has to decide whether they want to support cheaper and more reliability electricity,” Mr Turnbull said.

“We have got to bring an end to the years of ideology and idiocy which have been a curse on energy policy for too long and that is why industry – whether you’re talking about big industrial consumers or small business, consumer groups  – are calling on government, governments, and oppositions to get behind this policy.”

The four issues which we discussed earlier this week are still in a state of flux:

  1. The emission reduction targets can only ever increase and must not decrease.
  2. Targets need to be set in regulation (Energy Minister Josh Frydenberg has already rejected it).
  3. Emission reduction targets must be set every three years, three years in advance.
  4. Creation of a registry which is transparent and accessible by regulators and governments.

The opposition (federal Labor) are also in favour of the NEG but they want the 2030 emissions reduction target increased from 26% to 45%:

“We are still very keen on trying to find a bipartisan way through the deep energy crisis that has emerged under this Prime Minister,” shadow energy and climate change minister Mark Butler said.

“We will continue to fight for a much more ambitious investment setting for this sector so you do see new renewable energy jobs and investment and you do see downward pressure on power prices.”

According to former PM Tony Abbot, the NEG still needs a lot of work as most of its support is currently ‘conditional’ and at least a dozen members of the Coalition had expressed concern about the NEG. Abbot said that the provided explanations of how the NEG “might theoretically get prices down” sounded “like merchant bankers’ gobbledegook”:

‘We’ve got to be loyal to our electorates and to party members too and not show the unity of lemmings.’,” Mr Abbott continued.

The Australian Financial Review has the numbers at 26 MPs supporting the policy and around 10 yet to be convinced. 

For the next steps, the state ministers will be asked to support a month long public consultation on laws which will affect their constituents. The state legislation should then be finalised by the end of October and we’ll see what sort of shape (if any) the NEG is at that point. Federal legislation tied to the NEG will be introduced within the next 10 days. 

 

 

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Australian Solar Subsidies under fire in 2018.

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Australian solar subsidies are expected to cost $1.3b in 2018 as the Clean Energy Regulator estimate that 22 million small-scale technology certificates will be created. This will add approximately $100 to the average Australian solar bill. At what point, if at all, do we look at reining these subsidies in? 

Australian solar subsidies

Australian solar subsidies - Clean Energy Regulator
Australian solar subsidies – Clean Energy Regulator (source: cleanenergyregulator.gov.au)

The small-scale technology certificates (STCs) are given to people installing solar panels, and electricity retailers are required to buy them. So although this expected $1.3b will ostensibly be paid by the energy retailers, naturally the cost is passed on to the end user – resulting in even higher electricity bills.

Jeff Bye from Demand Manager in Sydney, a company that trades STCs, was quoted in the Australian as saying this years cost increase means an average electricity bill will raise by around $100:  

“The cost increase (this year) is about $800m and there are 8 million households … so there’ll be a cost impact of around $100 per household. The electricity impact might be $40 or $50 per household but businesses will pass through the additional cost too … That subsidy of $500m last year, or $1.2bn to $1.3bn this year, is added on to everyone’s bills.”

Is it time to abolish the solar subsidies?

Is this fair for renters or apartment dwellers (a rapidly increasing segment of the population)? At what point do we start to reconsider these subsidies?

With the price of solar + storage driving down as the technology gets better and better, there’s certainly going to be a ‘tipping point’ where the market can stand on its own two feet. But with Australian solar growing at an astronomical pace it’ll be difficult to find the right time/method to adjust these subsidies.

According to Energy Minister Josh Frydenberg, the Australian Energy Market Commission found the average cost to households over the past five years was about $29 a year.

“The AEMC forecasts residential electricity prices will fall over the next two years as renewable energy, including small-scale solar supported by the Renewable Energy Target, enters the system,” Mr Frydenberg said. So potentially some of that $100 will be offset by lower prices from the energy retailers. 

His political opponents were a little less hopeful – as backbencher and former PM Tony Abbott fired back after hearing the statistics, saying:

“Australians are paying far too much for our emissions obsession. Government must end subsidies for new renewables,”

Liberal MP Craig Kelly, Chair of the Coalition’s Backbench Energy and Environment Committee, told Chris Smith on 4BC his thoughts on the scheme:

“All these schemes have done is make electricity prices dearer for every single Australian.”

Whilst those quotes can certainly be taken with more than a grain of salt given the abysmal state of Australian politics, it’s definitely worth having a look at these subsidies against the cost of solar, its level of technological maturity, and schemes to help low income earners, renters, and apartment dwellers benefit from renewable energy as well. 

 

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