25/07/2018

Electricity Plan Would All But Hit Emissions Goal Before It Starts

Fairfax - Peter Hannam

The Turnbull government’s National Energy Guarantee - the centrepiece of its climate change and electricity policy - would help cut an average household’s power bills by $50 in its first year but do little to cut carbon emissions over the decade to 2030.
The final design report, produced by the Energy Security Board and sent to state governments this week, projects an emissions target that would be 97 per cent fulfilled before the NEG policy starts in 2021, leaving it with little work to do.
National energy policy will be decided in the next week, with ramifications potentially lasting decades. Photo: Paul Jones
The study found that power prices will drop sharply, with or without the NEG policy in place, before starting to rise again towards 2030.
Electricity bill savings
Forecast average retail bill saving relative to 2017-18
Source: ACIL Allen consulting
Households connected to the National Electricity Market - serving about 80 per cent of Australians - will save "around $550 a year" over the decade, compared with 2017-18, the paper said.
That estimate assumes network costs - the largest contributor to higher power bills over the past decade - are unchanged. About $150 of the annual household savings are "directly attributable" to the NEG.
The Turnbull government has touted the policy as delivering lower power prices and increased reliability of the grid, while also meeting a 26 per cent reduction in 2005-level greenhouse gas emissions by 2030.
The Environment and Energy Minister, Josh Frydenberg, said the policy would “deliver a more affordable and reliable energy system and has the backing of business, industry and community groups”.
“We think that 26 per cent target is right. It’s a pro-rata contribution out of the electricity sector as part of our overall Paris Agreement,” Mr Frydenberg said, adding the government would release its final paper on the emissions obligation before the COAG Energy Council next meets on August 10.

'Technology neutral'
The paper said the NEG policy is ‘‘fuel- and technology-neutral and provides a clear investment signal, so the cleanest, cheapest and most reliable generation ... gets built in the right place at the right time".
However, concerns that the plan’s emissions goals are feeble are borne out by the design paper. According to modelling done for the board by ACIL Allen, a surge in renewable energy projects between now and the plan’s start in 2020 means carbon emissions are dropping faster than expected, leaving little for the sector to achieve in the entire ensuing decade."
By 2021, emissions in the [National Electricity Market] are expected to be around 24 per cent below 2005," the report said.
All up, of the 1320 million tonnes of carbon-dioxide equivalent needed to be reduced by 2030, the NEG will need to deliver just 38 million tonnes - or less than 3 per cent.
"Put another way, that's a whole 3.8 million tonnes per year on average over the 10 years," Dylan McConnell, an energy analyst at Melbourne University, said.
Fairfax Media sought comment from state and territory governments. Several declined to comment until they had considered the report.
Guy Barnett, Tasmania's Energy Minister, said his state was "Australia’s renewable energy powerhouse," adding that "a well-designed NEG can deliver significant benefits for Tasmania”.

'Fifth-best option'
One state official, though, described the NEG as "the fifth-best option over the past few years".
The Energy Security Board had "done a fair bit of work" to ensure it could be grafted on the existing electricity market.
Wholesale electricity prices would be an average 20 per cent lower over the 2020s than without the plan, the modelling showed.
NEM wholesale prices under the guarantee
Source: Energy Security Board
The report did not model a more ambitious carbon target, which consultants such as Reputex say would push prices lower.
The federal government needs all states and territory governments to approve the NEG for it to proceed. It will likely highlight the modelling's results that show lower prices in all jurisdictions than without the plan.
Projected jurisdictional wholesale price outcomes
Source: Energy Security Board
Energy mix
Mr McConnell said the modelling appeared to be at odds with the Integrated System Plan released last week by the Australian Energy Market Operator.
For instance, the paper assumed AGL's Liddell and Queensland's Gladstone coal-fired power stations drop out by 2030, but AEMO predicts the Vales Point plant in NSW will have shut by then.
Change in NEM generation capacity by fuel type without the guarantee
Note: Changes in NEM-wide capacity under ‘no policy’ modelling scenario
Source: ACIL Allen consulting
"There is practically no new renewable energy from 2020-21," Mr McConnell said.
The Victorian, Queensland and ACT renewable energy targets appear to be overlooked as well.
The rooftop solar forecast, put at about 800 megawatt a year, may also be pessimistic. Some 702 MW of new rooftop photovoltaic panels were added in the first half of 2018 alone, according to Green Energy Markets.
The projections also assume the multi-billion dollar Snowy 2.0 pumped hydro scheme is up and running by 2023-24, otherwise electricity prices would be rising sooner.
The scheme is yet to finalise a business case, nor clear a range of environmental hurdles.
Under the design, Snowy Hydro - now owned by the Commonwealth - and Hydro Tasmania would potentially earn windfall profits from their pre-1997 built plant, without adding any low-emissions generation. That amounts to a potentially huge transfer of wealth from consumers, said Bruce Mountain, head of the new Victoria Energy Policy Centre.

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