Victoria, ACT harden stance on NEG, clear battle lines form

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The Victorian government has defined four concrete conditions it wants to see met in exchange for its support to the National Energy Guarantee (NEG), which if neglected, could turn into an insurmountable obstacle at Friday’s vote on the proposed national energy deal.

Casting a long shadow over the NEG, which needs unanimous support of the state and territory ministers to go ahead, the clear and unambiguous statement issued by the Daniel Andrews Labor Government said Victoria can support the NEG only if specific conditions are met that keep energy prices low and support local jobs.

“We won’t support any scheme that puts our renewable energy industry and Victorian jobs at risk,” Victorian Minister for Energy, Environment and Climate Change Lily D’Ambrosio said in a statement.

The government says the conditions will also ensure the Victorian Renewable Energy Target (VRET) of 40% by 2025 – and the thousands of local jobs it supports – are protected.

For Victoria to sign up to the proposed NEG, the following conditions will need to be met:

  • Emissions reduction targets can only be allowed to increase over time and never go backwards
  • Future targets will need to be set by regulation
  • The targets will need to be set every three years, three years in advance
  • Establishment of a transparent registry, with access by regulators and governments to ensure the NEG is working in the best interests of consumers.

The review of targets was also suggested by the Australian Capital Territory’s climate change minister, Shane Rattenbury, in his letter to federal energy minister, Josh Frydenberg. 

“My suggestion is that the target is reviewed no later than 2024, and that the final design of the NEG includes a mechanism to initiate a review immediately should electricity sector emissions reach a 24% reduction on 2005 levels,” reads the letter seen by Guardian Australia.

The flexibility of the emissions target was addressed by Energy Minister Josh Frydenberg, who tried to hammer out a NEG consensus, offering the possibility to review the emissions reductions target after five years, instead of being fixed for a 10 year-period.

The states are, however, looking for a mechanisms that will make it possible to review the targets much earlier and make it easier to scale them up in accordance with their local renewable energy agendas.

In addition to a lack of consensus among the states, it has been signaled that there has been no internal party agreement as well, and that Frydenberg has not got buy-ins from his Liberal and National Party colleagues.

This has led both the federal shadow energy and environment minister, along with Victoria and Queensland governments to call for the NEG to pass the test of the Liberal party room before signing up to the policy.

“We can still get this right – but only if Malcolm Turnbull stares down the climate-crazies in his party and puts a workable scheme on the table that doesn’t hurt local jobs and households,” said Victoria’s D’Ambrosio.

Diverging roads

Earlier this week, a range of businesses and energy stakeholders have called on the COAG Energy Council to approve the NEG. Surprisingly for some, one of the signatories of the joint statement was the Clean Energy Council (CEC).

The Smart Energy Council (SEC) has slammed the CEC for endorsing the policy, which it describes as “disaster for renewables“.

Noting that the NEG has five fundamental flaws: no encouragement for investment in renewables; no cut to coal pollution; no reduction in power bills; no way to easily change it; and that the final design has not yet been settled in the Coalition party room, Australia’s solar and storage peak body has described the CEC’s move as “unbelievable”.

It also reminded that aside from CEC members Adani and AGL, which may invest in renewables in the future, but are both heavily invested in fossil fuels, not one of the other signatories are likely to invest in clean energy.

In a separate statement, the CEC has set out its position on the NEG.

According to Clean Energy Council Chief Executive Kane Thornton, the NEG policy design has potential, but the low level of ambition on the emissions reduction target means the policy will be essentially useless unless this is addressed.

“The $10 billion of new investment being driven by the Renewable Energy Target means the current emissions target will already be almost completely met by the time the NEG starts operating. We need to pump up the target or there won’t be enough certainty to encourage new large-scale renewable energy projects,” Thornton said.

Since the tweaks that the CEC is calling for represent are fundamental to the NEG, it appears that the largely renewables-backed body is backing the policy based on its structure rather than settings. The CEC clearly recognizes the economic reality influencing the deployment of renewables places stability as a core factor, noting that investors need certainty to back wind and solar projects and continue drive down power prices.

“The current target will be put to the Australian Parliament later in the year, but there’s not much point legislating a target we will meet by default and which won’t actually do anything to encourage new investment. And if the political negotiations to secure the NEG result in a government commitment to build new coal, private investors will simply jump ship to other countries with a less volatile investment environment,” Thorton said.

Overall, the CEC suggestions almost completely overlap with those of the NEG opponents, calling for more frequent reviews of the target and a backstop that prevents future attempts to reduce the emissions reduction target.

In addition, the CEC has also proposed the NEG design should fully recognize the role of energy storage in supporting system reliability and be fixed. It has also stressed that offsets should be excluded from the scheme, as out-sourcing emissions reduction to other sectors means less investment in new energy generation, which means higher power prices.

When taken as a whole, the number and significance of the design issues highlighted by the CEC bring it closer to the SEC position that Australia needs the right policy, not just any policy.