Victorian minister plays hardball with Turnbull on the NEG


Michelle Grattan, University of Canberra

The Turnbull government is facing fresh trouble over its energy policy ahead of a crucial meeting next week, with Victoria’s Energy Minister Lily D’Ambrosio warning that the state won’t be rushed into signing onto the National Energy Guarantee (NEG).

In a speech to be delivered on Tuesday, D’Ambrosio will play on dissent in the Coalition, saying: “Malcolm Turnbull is trying to get us to sign up to something that hasn’t gone to his own party room – a place full of climate sceptics”.

“Every time we get close to a national energy policy, the Coalition party room shoots it down,” she will tell a clean energy summit in Sydney. An extract from her speech was issued ahead of its delivery.

“How can we have any confidence in what they’re asking from us if it hasn’t been through his party room first?

“We won’t rush into supporting a policy that we’re not certain is in the best interests of Victorians, just to appease to coal ideologues in Canberra.

“We won’t support a scheme that leaves the states in the dark and leaves us all hostage to the extremists in Turnbull’s party room,” D’Ambrosio will say.

Victoria’s shot across the bows on energy comes as Turnbull faces difficult fallout from the government’s disappointing byelection performance on Saturday, especially in the Queensland seat of Longman, where the Liberal National Party’s primary vote plunged by 9 points to just under 30%.




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This is fuelling a push from some within the Coalition for the government to abandon its policy for tax cuts for big business if, as expected, a fresh attempt to get the legislation through the Senate fails. Labor successfully exploited the company tax issue in the byelections.

Turnbull’s weakened authority will also embolden party room critics of the energy policy, led by Tony Abbott – although these are in a minority. Abbott on Monday repeated his call for Australia to withdraw from the Paris climate agreement and to cut immigration.

The Guardian reported on Monday that Energy Minister Josh Frydenberg had flagged a two-stage process, as he tries to bed down a deal on the NEG. Under his timetable the NEG mechanism would be agreed on August 10 at the meeting of the Council of Australian Governments energy council. On August 14 the states and territories would get the Commonwealth legislation on the emissions reduction part of the scheme and discuss it in a phone hook up.

The key to this timetable is that it would allow Frydenberg to put the Commonwealth legislation to the Coalition party room on August 14 ahead of it being presented to states and territories. He has previously said the legislation would go to the party room.

Abbott has unsuccessfully pressed for much more party room input before any Commonwealth-state deal is done.

It is not clear whether Victoria will actually try to stall a deal next week, or is just playing politics ahead of the meeting.

D’Ambrosio will say Victoria has “acted in good faith” on the development of the proposed NEG “but it’s no secret that like many other states, we have major concerns about it.”

“We have made it very clear from the beginning – we won’t let any policy get in the way of Victoria achieving our legislated renewable energy targets. Our targets are the only real guarantee to bring down power prices”. Victoria would continue to discuss its concerns ahead of next week’s meeting.

Meanwhile, amid the uncertainty about the company tax cuts’ future, Finance Minister Mathias Cormann strongly defended them. Cormann, who has been the government’s negotiator with the crossbench, is seen as its most committed advocate of the tax plan.

“We are working with the crossbench as we speak to secure the necessary support,” he told the ABC.

Pressed on whether the government would take the policy to the election if it could not win the Senate vote, Cormann said: “That is our position”.

“The bigger businesses around Australia in many ways are most exposed to the pressures of global competition and they employ many millions of Australians directly. Weaker bigger businesses in Australia means less business for smaller and medium-sized businesses.

“It also means lower job security for the people that big business employ directly and lower job security for the many employees in the many small and medium-sized businesses who supply products and services to those bigger businesses,” Cormann said.

Federal Liberal MP Luke Howarth, from Queensland, told Sky that if the measure could not be passed it should be dropped.

The ConversationAbbott, interviewed on 2GB, said he accepted the economic case for the company tax cuts but there were no votes in them.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

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The National Energy Guarantee is a flagship policy. So why hasn’t the modelling been made public?


Bruce Mountain, Victoria University

Central to the public debate about the National Energy Guarantee (NEG) has been the numerical forecasts of its effects – in particular how much it will reduce power prices. In a democracy whose households pay some of the world’s highest electricity bills, it is obvious why this measure should shape the narrative on energy policy.

But Plato tells us that good decisions are based on knowledge, not numbers. What’s more, electricity markets are incredibly complex, and therefore not amenable to straightforward predictions.

The Energy Security Board has put numbers at the centre of its NEG proposal, but the basis of these numbers is not clear. With 22 colleagues at 10 other Australian universities, we are calling for state and territory ministers to ensure that the ESB’s modelling is available for proper scrutiny. I explain here why I support this request.




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On October 17, 2017, the newly created ESB claimed in a letter to federal energy minister Josh Frydenberg that annual household bills would ultimately be A$100-115 lower under the NEG as a result of the NEG being introduced.

The ESB said this calculation was based on its estimate that wholesale electricity prices under the NEG would be 20-25% lower than under business as usual, and 8-10% lower than under the Clean Energy Target proposed by the Finkel Review.

No analysis or modelling was provided to justify these claims. But five weeks later the ESB had altered its forecast, releasing a report claiming that wholesale electricity prices would typically be 35% lower with the NEG than they would be without it. Underlying this claim was the assumption that only 597 megawatts of renewable generation would be developed between 2020 and 2030 if the NEG was not implemented.

Since more renewable generation than this was installed just on the roofs of Australia’s households and businesses in the first five months of 2018, the ESB was effectively suggesting that without the NEG investment in renewable generation would all but dry up.

This stands in stark contrast to the verdicts of other analysts. Bloomberg New Energy Finance predicted that 24,000MW of renewable generation (40 times more than the ESB’s figure) would be built between 2020 and 2030 without the NEG. Bloomberg also predicted less new renewable capacity with the NEG than without it.

Final design on the table

The ESB last week released its final design for the NEG to policymakers, but not the public. It now claims that the policy will reduce household electricity bills by A$150 a year relative to business as usual. It also now says that without the NEG around 8,000MW of new renewable generation will be installed (13 times more investment than it predicted eight months ago).

But the ESB says all of this will be installed behind the meter on the roofs of Australia’s homes and businesses and it persists with the assumption that no new large-scale renewable capacity will be built without the NEG.

But once again this seems to contrast vividly with what others are saying and doing. Several major companies have signed contracts for large-scale renewables, including Telstra, Carlton & United Breweries, Orora, and BlueScope Steel. The ESB’s assumption that all large-scale renewables development will grind to a halt without the NEG is even less plausible now than it was in November 2017.

Others have previously noted that the ESB’s estimate of renewable investment from 2020 to 2030 bears no relation to the estimates from the Australian Energy Market Operator (AEMO) of around 18,000 MW of additional renewable generation between 2020 and 2030, despite the ESB’s claims to the contrary.

However, the ESB’s final design has now helpfully clarified what several other analysts have already pointed out: that meeting the government’s target of reducing the electricity sector’s greenhouse emissions by 26% will require emissions reductions of just 2% between 2020 and 2030 beyond what is already set to be achieved. That is a meagre 0.2% cut per year that the NEG policy will be required to deliver.

I estimate that this will in fact be achieved several times over just with the 8,000MW of new rooftop solar capacity that the ESB predicts will happen even if the NEG is not implemented. To be clear, on the ESB’s numbers, Australia’s electricity sector greenhouse gas emissions will be lower than the government requires them to be, even if the NEG is not implemented. So how then can it be plausible to predict that the NEG will stimulate additional investment in renewable capacity beyond what would happen anyway?




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Explainer: why we shouldn’t be so quick to trust energy modelling


You can’t have your cake and eat it. If a policy is intended to make no difference to what would happen anyway, how can it be expected to drive down household bills by A$150?

And without putting its modelling into the public domain where it can be subjected to wider expert scrutiny, how will we know whether the ESB’s assumptions actually hold water?

The ConversationThe NEG will be a massive administrative change to Australia’s energy market, and a potentially substantive change if future governments set much higher emissions reduction targets. State and territory energy ministers are being asked to accept the ESB’s promise that household electricity bills will decline by 30-40% in the next few years, and that the NEG will account for a fair part of this. Those ministers should scrutinise this rosy projection carefully before accepting it. After all, the public will be looking to them, and not the federal government, to make good on these price pledges.

Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University

This article was originally published on The Conversation. Read the original article.