States sign off on next steps for the NEG, the rest is pure politics

The NEG, and along with it renewable energy, carbon emissions and electricity prices, looks like it may become a major federal election issue in early-to-mid 2019. The politically fraught policy’s passage into law, will now be decided with politics front-and-centre – and climate change and an energy transition almost a side-line to discussions.

The result is a poor one for the renewables sector. The NEG policy looks like it will be bolted onto to all or a cherry-picked selection of Australian Competition and Consumer Commission (ACCC) recommendations that will be damaging to small-scale solar in particular, and favourable to new or upgraded coal generators.

How did it come to this? Yesterday the NEG cleared some pretty big hurdles, but there are others to come. It passed with a majority through the coalition party room, with reports from the Australian Financial Review’s Phil Coorey suggesting that one in three speakers addressing the policy at the meeting spoke either in opposition to it, or expressed concerns.

Turnbull claims a win

Prime Minister Malcolm Turnbull, however, was not put off by the pushback within his own party room to the policy – at least in his public statements. Although Turnbull didn’t specifically roll out the $550-a-year annual electricity bill saving to which he’d previously referred, he presented the scheme as an electricity price mechanism, not an emission reduction one.

“The concerns [in the party room] were expressed across the board about prices and we share those,” said Turnbull speaking after the meeting. “Everything, everything we’re doing is seeking to bring down energy prices. The National Energy Guarantee, of course, addresses one part of the puzzle, it addresses the cost of generation. But of course, you’ve got poles and wires, you’ve got retail costs, you’ve got green schemes; it’s a complex business.”

Somewhat undermining the Prime Minister’s claim of “overwhelming” party room support, the AFR and others are reporting that four coalition MPs reserved the right to cross the floor and vote against the enabling legislation. A further five, who had expressed concerns during discussions, might join them.

This leaves the NEG’s reliant on Federal Labor’s support – a point that both Turnbull and Energy and Environment Minister Josh Frydenburg were quick to make.

“Now, we have held up our part of the bargain,” said Frydenburg, standing alongside the PM. “Now it’s time for Labor to uphold its part of the bargain.”

But exactly how Labor will vote on the NEG legislation in Parliament is unclear. Repeatedly, both Opposition Leader Bill Shorten and Shadow Energy Minister Mark Butler have stuck a conciliatory tone, calling for policy certainty for the energy sector. There have also been suggestions Labor will vote for the legislation in the House of Representatives, only to push for a higher emissions reductions target in the Senate.

However, on the back of the coalition party room deliberations yesterday, Butler made an uncompromising statement.

“What we saw today by this Prime Minister was the final act of capitulation to the hard Right of the coalition party room on climate change and energy policy,” said Butler. “The white flag is flying high over the Prime Minister’s office now because what he announced at the press conference was an energy plan that will not see a single renewable energy project built for a decade, an energy plan that will see the rates of installation of rooftop solar cut by a half, and an energy plan that will channel billions and billions of taxpayers’ money to building new coal-fired power stations.”

ACCC recommendations tacked on

The latter two points made by Butler refer to the ACCC recommendations the government intends to build into the NEG legislation. These measures were very likely what won the cautious support of climate change sceptics and coal boosters within the coalition such as former Deputy PM Barnaby Joyce and Queensland MP George Christensen.

“We had a very good discussion this morning with Rod Sims, the Chairman of the ACCC and author of that excellent report, whose recommendations we are seeking to implement and above all of course, recommendation number four,” said Turnbull. “Well, there’s a number of them that are of equal merit, but recommendation number four is of particular merit.”

Recommendation number four is for the Federal Government to be an offtaker of last resort for big dispatchable generators – most likely coal. More worrying for solar is another ACCC recommendation “of equal merit” the premature winding up the small-scale solar subsidy, the SRES – which will double the price of a sub-100kW rooftop solar system.

The NEG was never good, and with the ACCC recommendations bolted on it’s a mess. Now it’s more politically contentious than ever before. Labor may support the policy to clear the way for a 2019 election campaign on its preferred issues of opposing company tax cuts, and support for schools and hospitals.

The Turnbull Government will introduce the legislation to parliament within the fortnight. There will be a four-week statutory consultation period of the exposure draft. The rest will be pure politics.