Why Turnbull’s Plan Could Be Disaster For Renewables, Climate, Prices

RenewEconomy - Giles Parkinson

(AAP Image/Mick Tsikas)

On the face of it a twin-pronged system focusing on reliability and environmental outcomes could have appeal. But we just don’t know because the details of Malcolm Turnbull’s National Energy Guarantee (NEG), and even the basics of how it will work, have not been explained.
As one clean energy advocate said on Tuesday: “We’re still trying to understand whether we love or hate the NEG”. Part of that hesitation is based around the oft-made assumption that it might be better to have something, rather than nothing. But that remains to be seen.
The mainstream media certainly embraced it, but analysts see red flags all over the place – it is potentially bad news for renewables, bad news for emissions, and bad news for prices. It is potentially Turnbull’s energy trilemma turned upside down.
Most of all, the proposal appears to be the most ill-considered, poorly detailed and potentially useless policy that anyone can remember – the work of Australia’s so-called “energy mafia” hungry to defend the power of the incumbent oligopoly, commercial interests and their ideology.
Here’s a list of reasons why people should be concerned.

Did anyone tell the Coalition party room that this is a de-facto carbon price?
Energy analysts say it is a little early to tell, because there are no actual details, but it looks variously like a emissions intensity scheme, which Turnbull has been pushing for in various forms since 2008, or a mix of a baseline and credit scheme and a capacity market.
Market analysts Reputex describe it is a de-facto carbon price. “The attributes of the NEG will, in effect, establish a de-facto price on greenhouse gas emissions from the power sector, and provide a robust source of demand for Australian Carbon Credit Units (ACCU),” it says.
Little wonder, then, that Tony Abbott is not impressed. “Tony is a conscientious objector,” says energy minister Josh Frydenberg. But he’ll apparently hold his tongue for the moment.

But this carbon price will be invisible
Not only will it be a de-facto carbon price, it will also be invisible,  because the “market” will be hidden by the complexity of energy price caps and hedges. That is a major concern.
There is absolutely no transparency in this market, which is why the big gen-tailers are in favour of it, because it hands them absolute control and discretion over the market and investments.
The scheme will, ostensibly, be monitored by the same useless regulators that allowed the networks – and latterly the generators and retailers – to gouge consumers over the last 10 years, and enabled them, more recently, to “play” the market for certificates in the renewable energy target.
It’s hardly reassuring for the consumer. The power of the energy oligopoly is simply reinforced.

The emissions target are manifestly inadequate
The emissions reduction target that the ESB was asked to work with – a 26 per cent cut in electricity emissions from 2005 levels by 2030 – is manifestly inadequate, for even Australia’s current climate commitment (it loads a lot of effort on to other sectors), but also to the ultimate goal of capping global warming well below 2°C.
Even Origin Energy recognises this, noting the cavernous gap between the Paris target and the current emissions trajectory, a trajectory made worse by the government’s hint that any emissions targets will be “back-ended” to 2030.
But as with Finkel, the low target might be deliberate, so as not to scare the horses and the climate deniers. (Note the IPA came out again on Tuesday and argued for no emission cuts).
Had Finkel couched his review in terms of what needed to be done, like the Climate Change Authority, his conclusion would likely have been a renewables share approaching 70 per cent by 2030, not the 42 per cent in his document.

And those emissions targets may have been largely met, already
The big question is how much new investment the scheme will pull in. Not a lot. That’s because, as David Leitch tells us, the current build-out of renewables under the renewable energy target, and the closure of the Hazelwood power station has already got the country much of the way there.
Leitch says that, on his numbers, only around 4,000MW of new large-scale renewables would be required between 2020 and 2030 to meet the current emissions target. That’s not much. The scheme would only work if there were serious reduction targets. And he doesn’t hold out much hope of that, in the current political environment.
Worse, he notes of Snowy 2.0: “(The government) is funding a very expensive project designed to supply a reliability rule that they have expressly forced onto retailers. In essence it is making a rule that requires retailers to buy the output from its own project. The mafia would approve.”

It could mean zero additions to large-scale renewables
Even Leitch’s analysis could be optimistic. The advice from the ESB suggests a range of 28-36 per cent renewables by 2030, and 18-24 per cent wind and solar share. This estimate includes rooftop solar, according to ESB chair Kerry Schott.
Given the anticipated, and one would suspect, unstoppable uptake of rooftop solar by households and businesses in response to high power prices that are not coming down, it means that at the bottom end of their range, the ESB is predicting virtually no new wind and solar projects in the country between 2020 and 2030.
And given that anticipated surge in rooftop solar, even the top end of the forecast allows for little in the way of new renewables, which seems extraordinary given the recognition by Schott and even the Coalition about the falling cost of wind and solar.

Fancy investing in a Peru landfill gas mine rather than an Australia wind farm?
The market component even has an international flavour. The advice from the ESB includes the possibility of retailers meeting their environmental obligations through international credits.
That likely means that rather than investing in an Australian wind or solar farm, the likes of Origin, AGL and EnergyAustralia could invest in a third-world project that generates cheap credits – like the Peruvian landfill gas plant and other facilities supported by the UN’s Clean Development Mechanism that small retailer PowerShop invests in so it can claim to be “carbon neutral”.

And it may not lead to investment certainty
Many are defending the NEG on the basis that any sort of policy is better than nothing. That reminds us of Turnbull’s last major achievement, the bastardisation of the CPRS before he was rolled by Abbott in 2009.
Morgan Stanley’s Rob Koh notes that, on the detail presented so far, the government will set emissions reductions pathway (rather than that being done by an independent body).
“The risk of political interference in the targets may reduce investor confidence in the scheme, particularly where there is no explicit linkage to Australia’s Paris Agreement commitments,” Koh writes. And because no one else has done this sort of scheme, it will inevitably have to be fine-tuned.

The price cuts are trivial, so consumers will find own way with solar and storage
The promised price reductions of around $100 a year have not been modelled, may be as low as 50c a week, and may just be a figment of Pierce’s imagination. It just hasn’t been modelled. Given the absurdly high price of electricity in Australia and the competing forces of rooftop solar and storage, that offers nothing to consumers.
“Regardless of what Turnbull and his mates decide, shaving between $25-$100 off someone’s bill is meaningless compared to the difference that behind the meter PV, storage and demand management can make,” says Adrian Merrick from EnergyLocals.
“While they focus on gaining votes from policy headlines, we’re quietly making the change a reality.” Tomorrow, on One Step Off The Grid, another example will be published of how consumers will do this.

What does it mean for the states?
No one is too sure. The Labor states have targets ranging from 40 per cent by 2025 (Victoria), to 50 per cent by 2030 (Queensland and the NT) and 100% by 2020 (ACT). South Australia is already at more than 50 per cent.
But after what has been described as a testy phone hook-up between Frydenberg and the state ministers, the states say they have been gobsmacked by the lack of detail, and the apparent back-flip by the Coalition, who having once damned the states for “going it alone” now want them to do the heavy lifting.
The Coalition needs state approval for the changes, because they involve alterations to the market rules.

A victory for the energy mafia?
This is the question everyone is asking. An eight-page letter with no detail and some fuzzy ideas, ostensibly from the Energy Security Board, comprising two new independent directors (Schott and Clare Savage) and the heads of AEMO, AEMC and the AER.
This is the sort of scheme that the energy oligopoly and their attendants in various consultancies and think tanks (some call them the energy mafia) have been busting to do for years. See our first point about the lack of transparency in the markets and the control by the incumbents.
And all fingers are pointing to John Pierce, the head of the AEMC, the rule-maker that has fought so hard against renewable targets, and rule changes, and has been a staunch defender of fossil fuel markets.
He appears to have seized an opportunity, with impeccable timing, and was clearly joined by key players in the major utilities who have been quick to give their imprimatur. There is a body of opinion in the energy market that Pierce has outflanked his rivals and peers.
It was noticeable that Turnbull deflected to Pierce during the various briefing – indeed, Turnbull has been using the heads of the various agencies as some sort of human shield to deflect attacks, defending the policy’s expediency through their “expertise”.
Schott further added to this view of the role of Pierce, suggesting it was the culmination of a “year of work”. But the ESB only met for the first time a month ago. And the only member of the ESB “around for years” is Pierce.

Schott’s quick change on renewables
The fact that the heads of the other agencies were willing to put their names on such a vague document has surprised many in the industry, particularly in the case of Schott, admired for being a no-nonsence administrator.
Here, Schott has signed her name to a document apparently condemning renewables to zero or limited growth in the next decade. Yet it was just a few months ago that Schott was chair of Transgrid, a major transmission company that said decarbonising the grid with a very high penetration of renewables was not only doable within a few decades, but would also lower prices.
See this story Transgrid: 100% renewables is feasible and affordable. That’s not the story that the ESB is telling us now. What do they know that the boffins at the networks and the CSIRO do not?

Is AEMO confusing the role of system security and dispatchability?
The role of AEMO is also curious. On Tuesday at the behest of the prime minister, AEMO CEO Audrey Zibelman talked about the recent interventions by AEMO into the South Australia market, which included limiting the amount of wind if not enough gas generation was present.
But this immediately raised questions about what these interventions – largely about the level of “fault current” – have got to do with dispatchability and the recommendations of the ESB. The CEC’s policy wonk, Tom Butler, tweeted this after the Tuesday press conference:

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There is normally plenty of dispatchable generation in South Australia, it’s just that the plant operators have to be given a boot up the backside by the market operator to switch them on. System security is one thing, dispatchability is another. It is not clear how the NEG would address that.
We asked AEMO and were advised to talk to the ESB. But, we said, the ESB is just the heads of the agencies, of which AEMO is one. Finally we got a reply:
“The NEG provides the opportunity to signal what the system requires to ensure reliability. AEMO has been consistent in its position that we require a portfolio of resources that meet all the objectives (such as frequency, inertia, voltage control etc) to maintain power system security and reliability.”
They suggested we talk to Schott. But Schott’s office said that wasn’t possible until next week at the earliest.

Links

• Turnbull dumps clean energy target for “national energy guarantee”
• Coalition wrestles with internal demons on clean energy target
• Batteries are energy on tap – but who owns the tap?
• S.A. puts energy security target on back-burner after AEMO steps in
• How the far Right have hijacked Australia’s energy policy
• Victorian Liberal Party goes the full Trump on climate and energy
• Finkel offers cheaper, cleaner energy – all carrots and no stick
• Fall in renewable energy certificate futures intrigues market

Household Savings Figures In Turnbull’s Energy Policy Look Rubbery

The Conversation - Michelle Grattan

Malcolm Turnbull and Josh Frydenberg surrounded by members of the government’s Energy Security Board. Mick Tsikas/AAP

The big questions about Malcolm Turnbull’s energy policy will be, for consumers, what it would mean for their bills and, for business, how confident it can be that the approach would hold if Bill Shorten were elected.
The government needs to convince people they’ll get some price relief, but even as Turnbull unveiled the policy the rubbery nature of the household savings became apparent.
Crucially, the policy aims to give investors the certainty they have demanded. But the risk is this could be undermined if Labor, which is well ahead in the polls, indicated an ALP government would go off in yet another direction.
And most immediately, there is also the issue of states’ attitudes, because their co-operation is needed for the policy’s implementation. Turnbull talked to premiers after the announcement, and the plan goes to the Council of Australian Governments (COAG) next month.
Turnbull describes the policy as “a game-changer” that would deliver “affordability, reliability and responsibility [on emissions reduction]”.
Unsurprisingly – given it would end the subsidy for renewables, rejecting Chief Scientist Alan Finkel’s recommendation for a clean energy target – the policy sailed through the Coalition partyroom with overwhelming support.
Finkel later chose to go along with it rather than be offended by the discarding of his proposal. The important thing, he said, was that “they’re effectively adopting an orderly transition” for the energy sector, which was what he had urged.
In the partyroom Tony Abbott was very much a minority voice when he criticised the plan; his desire for a discussion of the politics was effectively put down by a prime minister who had his predecessor’s measure on the day.
The policy – recommended by the Energy Security Board, which includes representatives of the bodies operating and regulating the national energy market – is based on a new “national energy guarantee”, with two components.
Energy retailers across the National Electricity Market, which covers the eastern states, would have to “deliver reliable and lower emissions generation each year”.
A “reliability guarantee” would be set to deliver the level of dispatchable energy – from coal, gas, pumped hydro, batteries – needed in each state. An “emissions guarantee” would also be set, to contribute to Australia’s Paris commitments.
According to the Energy Security Board’s analysis, “it is expected that following the guarantee could lead to a reduction in residential bills in the order of A$100-115 per annum over the 2020-2030 period”. The savings would phase up during the period.
When probed, that estimate came to look pretty rough and ready. More modelling has to be done. In Question Time, Turnbull could give no additional information about the numbers, saying he only had what was in the board’s letter to the government.
So people shouldn’t be hanging out for the financial relief this policy would bring. Although to be fair, Turnbull points to the fact it is part of a suite of measures the government is undertaking.
Business welcomed the policy, but made it clear it wanted more detail and – crucially – that it is looking for bipartisanship.
The Australian Chamber of Commerce and Industry said the policy’s detail “and its ability to win bipartisan and COAG support will be critical”. Andy Vesey, chief executive of AGL, tweeted that “with bipartisan support” the policy would provide investment certainty.

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The Australian Industry Group said it was “a plausible new direction for energy policy” but “only bipartisanship on energy policy will create the conditions for long-term investment in energy generation and by big energy users”.
It’s not entirely clear whether the government would prefer a settlement or a stoush with the opposition on energy.
Turnbull told parliament it had arranged for the opposition to have a briefing from the Energy Security Board, and urged Labor to “get on board” with the policy.
But Labor homed in on his not giving a “guarantee” on price, as well as the smallness of the projected savings. Climate spokesman Mark Butler said it appeared it would be “just a 50 cent [a week] saving for households in three years’ time, perhaps rising to as much as $2.00 per week in a decade”.
But while the opposition has gone on the attack, it is also hedging its bets, playing for time.
“We’ve got to have … some meat on the bones,” Butler said. “Because all the prime minister really announced today was a bunch of bones.”
“We need detail to be able to sit down with stakeholders, with the energy industry, with big businesses that use lots of energy, with stakeholder groups that represent households, and obviously state and territory governments as well, and start to talk to them about the way forward in light of the announcement the government made today,” he said.
The initial reaction from state Labor is narky. Victorian Premier Daniel Andrews said it seemed Finkel had been replaced by “professor Tony Abbott as the chief scientist”, while South Australia’s Jay Weatherill claimed Turnbull “has now delivered a coal energy target.”
These are early days in this argument. Federal Labor will have to decide how big an issue it wants to make energy and climate at the election. Apart from talking to stakeholders and waiting for more detail, it wants to see whether the plan flies at COAG.
If it does, the federal opposition could say that rather than tear up the scheme in government, it would tweak it and build on it. That way, Labor would avoid criticism it was undermining investment confidence.
But if there is an impasse with the states and the plan is poorly received by the public, the “climate wars” could become hotter.

Links

• Infographic: the National Energy Guarantee at a glance
• Federal government unveils ‘National Energy Guarantee’ – experts react
• How the National Energy Guarantee could work better than a clean energy target
• The government’s energy policy hinges on some tricky wordplay about coal’s role
• Annual consumption overview
• Coal remains an important source of baseline power: Frydenberg
• Baffled by baseload? Dumbfounded by dispatchables? Here’s a glossary of the energy debate

The Government’s Energy Policy Hinges On Some Tricky Wordplay About Coal’s Role

The Conversation - John Quiggin

The new policy could end up feeding demand for coal. AAP Image/Dan Himbrechts

The most important thing to understand about the federal government’s new National Energy Guarantee is that it is designed not to produce a sustainable and reliable electricity supply system for the future, but to meet purely political objectives for the current term of parliament.
Those political objectives are: to provide a point of policy difference with the Labor Party; to meet the demands of the government’s backbench to provide support for coal-fired electricity; and to be seen to be acting to hold power prices down.
Meeting these objectives solves Prime Minister Malcolm Turnbull’s immediate political problems. But it comes at the cost of producing a policy that can only produce further confusion and delay.
The government’s central problem is that, as well as being polluting, coal-fired power is not well suited to the problem of increasingly high peaks in power demand, combined with slow growth in total demand.
Coal-fired power plants are expensive to start up and shut down, and are therefore best suited to meeting “baseload demand” – that is, the base level of electricity demand that never goes away. Until recently, this characteristic of coal was pushed by the government as the main reason we needed to maintain coal-fired power.
The opposite of baseload power is “dispatchable” power, which can be turned on and off as needed.
Classic sources of dispatchable power include hydroelectricity and gas, while recent technological advances mean that large-scale battery storage is now also a feasible option.
Coal-fired plants can be adapted to be “load-following” which gives them some flexibility in their output. But this requires expensive investment and reduces the plants’ operating life. The process is particularly ill-suited to the so-called High Efficiency, Low Emissions (HELE) plants being pushed as a solution to the other half of the policy problem, reducing carbon dioxide emissions.
Given that there is only limited capacity to expand hydro (Turnbull’s Snowy 2.0 is years away, if it ever happens) and that successive governments have made a mess of gas policy, any serious expansion of dispatchable power would realistically need to focus on batteries. The South Australian government reached this conclusion some time ago, making a decision to invest in its own battery storage. That move was roundly condemned by the federal government, which at the time was still focused on baseload.
The government’s emphasis on baseload was always mistaken, but the confusion and noise surrounding energy policy meant that few people understood this. That changed in September when the Australian Energy Market Operator (AEMO) reported that Australia’s National Electricity Market faced a capacity shortfall of up to 1,000 megawatts for the coming summer, and that older baseload power stations will struggle to cope.
Clearly this situation called for more flexibility in dispatchable sources in the short term, and widespread investment in dispatchables for the long term.

A question of definition
Obviously, this presented Turnbull with a dilemma. The policy advice clearly favoured dispatchables, but vocal members of his backbench wanted a policy to subsidise coal.
The answer was breathtakingly simple. The new policy redefines coal as dispatchable, despite it having the opposite technological characteristics.
This is not an entirely new approach. Before the government decided to abandon the proposed Clean Energy Target it put a lot of effort into redefining coal as “clean”. The approach here involved creating confusion between carbon capture and storage (CCS) and HELE power stations. CCS involves capturing carbon dioxide from power station smokestacks and pumping it underground, thereby avoiding emissions. This would be a great solution to the problems of carbon pollution if it worked, but unfortunately it’s hopelessly uneconomic
By contrast, HELE is just a fancy name for the marginal improvements made to coal-fired technology over the 30-50 years since most of our existing coal-fired plants were designed and built. The “low” emissions are far higher than those for gas-fired power, let alone renewables or, for that matter, nuclear energy (another uneconomic option).
The core of the government’s plan is a requirement that all electricity retailers should provide a certain proportion of dispatchable electricity – a term that has now been arbitrarily defined to include coal. By creating a demand for this supposedly dispatchable power, the policy discourages the retirement of the very coal units that AEMO has identified as ill-suited to our needs.

Elusive certainty?
Given that the policy is unlikely to survive beyond the next election, it’s unlikely that it will prompt anyone to build a new gas-fired power station, let alone a coal-fired plant. So the only real effect will be to discourage investment in renewables and create yet further policy uncertainty.
This undermines the basis for the (unreleased) modelling supposedly showing that household electricity costs will fall. These savings are supposed to arise from the investment certainty resulting from bipartisan agreement. But the political imperative for the government is to put forward a policy Labor can’t support, to provide leverage in an election campaign. If the government had wanted policy certainty it could have accepted Labor’s offer to support the Clean Energy Target.
It remains to be seen whether this scheme will achieve the government’s political objectives. It is already evident, however, that it does not represent a long-term solution to our problems in energy and climate policy.

Links

• Infographic: the National Energy Guarantee at a glance
• Federal government unveils ‘National Energy Guarantee’ – experts react
• How the National Energy Guarantee could work better than a clean energy target
• Household savings figures in Turnbull’s energy policy look rubbery
• Annual consumption overview
• Coal remains an important source of baseline power: Frydenberg
• Baffled by baseload? Dumbfounded by dispatchables? Here’s a glossary of the energy debate

There's Not Going To Be A CET, So What Have We Got Instead? And What Does That Mean For Consumers?

ABC News - Louise Yaxley | Lucy Sweeney

A National Energy Guarantee is central to the Coalition's new policy. (ABC News: Dean Faulkner)

Malcolm Turnbull has unveiled his shiny new energy policy, complete with its own three-letter acronym to replace the doomed Clean Energy Target. The Government claims the new plan — including a National Energy Guarantee, or NEG — will be kinder to hip pockets and will reduce emissions enough for Australia to uphold its end of the Paris climate change agreement.
Here's what it all means.

So what's new?
The Government is effectively putting the onus on retailers to guarantee (the G in NEG) two things: reliable supply and emissions reduction.
The first part of that means power companies would be required to use a percentage of electricity from so-called dispatchable sources such as coal, gas, batteries and pumped hydro.
This would be ready to use at short notice to stop blackouts like the one seen in SA last year.
It would also keep the power system stable at a lower price because it would be done via long-term contracts, not the short-term spot price.
The second part — reducing emissions — means they'll be scrapping subsidies and incentives for renewables and instead expecting retailers to ensure the power that they're buying is efficient enough to help Australia meet its international obligations (i.e. what we signed up to do during the Paris climate change conference).
It's not yet clear what the penalty would be for companies who fall short of that, but it's likely they would be able to make up a shortfall the following year.

Will my power be cheaper?
Malcolm Turnbull says: YES.
Spruiking the new plan, the Prime Minister said: "Your power bills are too high and rising too fast."
So how much are we talking? The typical household could save between $110 and $115 each year for a decade from 2020, according to the Energy Security Board, who costed things for the Government.

This is how the Prime Minister is spruiking his new plan (ABC News)

Here's what deputy Liberal leader Julie Bishop had to say:
"This is a very secure way of ensuring reliability, affordability and meeting our Paris commitments … it doesn't require a CET, it works on market mechanisms and will drive prices down."
But keeping the power bills down is reliant on a range of measures including state government policies.

What about reliability?
"Keeping the lights on" is the a key element of the Government's mantra.
It insists that the scheme is designed to ensure that the electricity supply will be more reliable because power companies will have to use "dispatchable" power.
The Government is already backing Chief Scientist Alan Finkel's call for more investment in batteries. His aim is to make solar power more reliable because the energy could be stored and released to prevent shortages, and the Government has adopted that plan.
This goes much further by making the power companies source some of their power from baseload sources like coal, gas, pumped hydro or even encouraging ways to reduce demand.

Will it bring down emissions enough?

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What is the Paris Agreement?

Here's a simple explanation of the agreement, and what it means for Australia.

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In November last year the Government promised to reduce emissions by between 26 and 28 per cent by 2030 as part of the Paris climate change accord.
It says that target still be met, but with no incentives or subsidies for renewables under this scheme.
The Government says renewables are becoming more competitive without subsidies, so the Renewable Energy Target is no longer necessary.
It's understood those subsidies for using renewables will be phased out after 2020.
Labor argues the new plan would destroy the renewables sector.
The Climate Council says it will mean less renewable energy than we need to tackle climate change.

Will it keep coal-fired power plants running longer?
Power companies will be forced to use baseload sources, which could keep some coal-fired power plants operating longer.
But the Clean Energy Council says these plants are becoming unreliable because of their age.
Malcolm Turnbull said solar, wind, coal, gas, batteries and pumped hydro would all be part of the energy mix.

How did we get here again?

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Explaining the Finkel report

You might have heard about this big government report called the Finkel review — here's what it could mean for Australia's energy sector.

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Towards the end of last year, the Federal Government asked its Chief Scientist, Alan Finkel, to review the energy sector after a statewide blackout in South Australia. That review focused on the sustainability of the current system, its environmental impacts, and affordability for consumers.
Dr Finkel came back with a bunch of recommendations. One of those was a Clean Energy Target, which would have seen electricity companies forced to provide a set percentage of their power from low emissions (clean) technology — things like renewables and efficient gas.
His modelling showed a CET would lower power prices by subsidising investment in clean power generation, increasing the supply of electricity. But some in the Coalition were sceptical about the CET, saying it would make for less reliable service.
And so the Government went back to the drawing board, and came up with this plan.

Will the NEG get the nod?
The Government thinks it can make these changes without federal legislation, meaning it could avoid a Senate showdown.
But they will need the backing of the states and territories, which have their own policies over energy.
Either way, the bipartisan approach to energy has died with the CET.
Federal Labor attacked the Government's approach as a capitulation to former prime minister Tony Abbott.
Labor will have to return to its own version of an energy plan that reduces emissions.

Links

• Coalition signs off on new energy plan to replace Clean Energy Target
• Australia shuns clean energy target in policy overhaul
• Australia rejects clean energy target for cheaper power
• Coalition defends energy plan by attacking Labor's record
• Axe the Clean Energy Target? The ACCC doesn't think so
• Australia wind and solar power overtake gas in September

Malcolm Turnbull Convinces Party To Unite On Energy Policy

The Guardian - Katharine Murphy

Prime minister wins party room backing despite Tony Abbott bid for delay, but policy may be resisted by states

Malcolm Turnbull releasing the Coalition’s energy policy on Monday. Photograph: Mike Bowers for the Guardian

Malcolm Turnbull has secured party room backing to impose new reliability and emissions reduction guarantees on energy retailers and large energy users from 2020.
But the emissions reduction trajectory, the most internally sensitive component of the reform, will require new legislation, and the government has been advised to implement the new scheme with the support of state governments passing complementary laws – which could render Turnbull’s reworked proposal dead on arrival.
While the government characterised its new energy guarantee as a “game changer”, Labor quickly blasted the decision to dump the clean energy target recommended by the chief scientist, Alan Finkel. A handful of government MPs, including Tony Abbott, expressed objections to the emissions reduction element of the overhaul during party room debate.
Labor has also zeroed in on the price aspects of the scheme. The government contends its new energy framework will lower prices for households by between $100 and $115 per year, but the opposition suggests those estimates are rubbery, given serious modelling has not yet been undertaken.
After months of internal controversy, the government on Tuesday dumped the clean energy target favoured by Finkel in favour of a new “national energy guarantee” which will impose a reliability and emissions reduction guarantee on retailers and some large energy users.
With Coalition conservatives fiercely opposed the Finkel clean energy target on the basis it would provide ongoing subsidies to renewable energy, the prime minister and the energy minister have sold the policy internally as an end to picking winners, and the beginning of technological neutrality.
The new rules would oblige retailers to meet a percentage of their load requirements with flexible and dispatchable power resources which can be scheduled by the energy market operator depending on the requirements of the system.
The emissions reduction obligation, like the reliability requirement, will require retailers to enter into contracts for the supply of energy at a certain emissions level. If retailers don’t meet their new obligations on a persistent basis, the penalty is market deregistration.
The government says the new emissions reduction target for electricity will likely be 26% on 2005 levels by 2030.
But if that’s where the target is ultimately set, that will require other sectors of the economy to do most of the heavy lifting if Australia is to have any hope of meeting our target under the Paris climate agreement.
Heavy emitters exposed to international competition will be excluded from the emissions reduction obligation, and speaking to reporters on Tuesday, the prime minister said there was “potential for back-ending a fair bit” of the emissions reduction task for electricity because of declining costs.
As foreshadowed by Guardian Australia, retailers will also be able to use international permits to help meet their abatement obligations.
The existing federal renewable energy target will peak in 2020 and run through to 2030, with projects grandfathered, which means the existing rules and frameworks continue to apply until the scheme wraps.
During Tuesday’s party room discussion, Tony Abbott, Matt Canavan, David Gillespie and George Christensen raised concerns about the policy, and Abbott argued that the government should delay any decision.
Given there was some dissent, Turnbull asked MPs whether they wanted to continue the discussion later in the afternoon or next week – but the overwhelming view in the party room was to settle the issue by agreement on Tuesday.
The government has elevated electricity prices to the centre of the political debate, and is claiming positive price impacts as a consequence of the energy guarantee when compared with the impact of Finkel’s clean energy target.
The Energy Security Board, which is a regulatory body set up by the Council of Australian Governments (Coag) to implement the Finkel review, has told the government the guarantee “could lead to a reduction in residential bills in the order of $100 to $115 per annum over the 2020-2030 period”.
It contends an end to the policy uncertainty will prompt a reduction in wholesale prices of 20% to 25% a year over the same period.
But John Pierce, the chair of the Australian Energy Market Commission, made it clear the figure was based on only preliminary analysis. He said more detailed analysis would be carried out in the lead-up to the Coag meeting in November.
He said “firmer estimates of those price effects” would be provided later in the year.
In question time on Tuesday, Labor asked Turnbull whether the Energy Security Board had provided lower figures to the government about the level of household savings associated with the policy.
The prime minister said the “only information I have” was the $100 to $115 figure, and he rounded on Labor for pursuing the question.
“The leader of the opposition is impugning the integrity of the members of the Energy Security Board,” the prime minister said.
Australia’s energy sector says no policy solution will fix the current problems unless there is bipartisan support for the reforms to create certainty for investors.
Labor is reserving its position on the package. The shadow climate minister, Mark Butler, said the government’s new framework was thin on detail, lacked proper modelling, and was little more than “bare bones”.
Butler said the government has presided over an “utterly shambolic process”.
Finkel was more diplomatic. He told reporters he had been consulted on the government’s alternative proposal at a late stage, and he had not seen any economic modelling underpinning the national energy guarantee.
But Finkel gave the proposal, cautious endorsement, suggesting the approach was “logical” and would likely to have a similar price impact to the clean energy target modelled in his review.

Links

• Tony Abbott's climate frolic is strange and sad – and all about politics
• Coalition defends energy plan by attacking Labor's record – as it happened
• Coalition balks on Finkel target but will unveil energy and emissions policy
• Alan Finkel defends clean energy target as Coalition turns its back
• Frydenberg signals government poised to abandon clean energy target
• Turnbull rejects efforts to ‘dumb down’ energy debate into renewables v coal
• Turnbull ignored advice that renewable energy not to blame for SA blackouts
• Coalition's renewable energy target won't last forever, says Turnbull

The Turnbull Government's New Energy Policy Will Shave $2 Off Your Weekly Power Bill

Fairfax - Nicole Hasham

Households will be an average $2 a week better off under a reinvention of Australia's energy and emissions policy – and the Turnbull government has refused to guarantee even those meagre savings.
It emerged on Tuesday that the savings could start as low as $25 a year, or 50¢ a week.

The government's energy policy explained
Here's what you need to know about the national energy guarantee - the government's newest energy policy.

Despite pitching the policy as a salve to the hip pockets of price-weary power consumers, the government also concedes that the predicted cost saving was based on preliminary analysis, and detailed modelling has not yet been carried out.
The government on Tuesday sought to reset the national energy debate by announcing energy companies will be forced to meet mandated standards of reliability and emissions reduction, which would reduce the risk of blackouts and drive prices down.
Polls show voters are deeply concerned about soaring power bills, and the government's ability to address the problem is a key element on which the policy will be judged.
Mr Turnbull described the measure as a "game-changer ... that will ensure that we have affordable power".
"It provides investor certainty, which the market has been crying out for for a long time. It reduces volatility, which, of course, has been driving up prices," Mr Turnbull said.
Known as the national energy guarantee, the policy is based on a unanimous recommendation by the independent Energy Security Board, chaired by Dr Kerry Schott.

Prime Minister Malcolm Turnbull sells the policy during question time on Tuesday. Photo: Alex Ellinghausen

The board advised the government that the guarantee could cut residential bills by an average $100-$115 a year in the decade to 2030.
Wholesale prices were expected to drop by up to 25 per cent a year over the same period.

Energy officials need to do more work to determine the exact potential household saving. Photo: Matt Davidson

Australian Energy Market Commission chair John Pierce on Tuesday told Sky News that under other modelling scenarios, households would save just $25 a year in 2020 – or 50¢ a week.
The annual household saving spruiked by the government is greater than the $90 predicted under the clean energy target recommended by Chief Scientist Alan Finkel – the prospect of which the government has abandoned.
However Mr Turnbull on Tuesday repeatedly refused to guarantee the price saving would be achieved.
He referred inquiries to Mr Pierce, a member of the advisory board who said the figures were based on "analysis and modelling of the market and the alternative schemes that we've looked at in the past".
Mr Pierce said the board would undertake "detailed analysis and modelling" of the proposal ahead of a November meeting of the Council of Australian Governments to provide "firmer estimates of those price effects".
He said the policy would drive down household bills in three ways.
The measures would end policy uncertainty, leading to increased investment, and hence, electricity supply.
The mechanism would also use existing market contracts to find a more efficient mix between dispatchable and low emissions energy, and competition would be improved because energy retailers would enter contracts with the lowest-cost energy providers.
Labor's energy and climate change spokesman Mark Butler on Tuesday said the government was unwilling to guarantee price savings to households and had "confirmed no modelling has been undertaken".
"At best it would appear that the broad analysis that has been undertaken would involve a 50¢ per week saving for households in three years time, perhaps rising to as much as $2 a week."
"It's now incumbent on Malcolm Turnbull to release some real detail about this policy so we can all understand what the impact would be," Mr Butler said.

Links

• Malcolm Turnbull unveils the government's new energy policy
• Meet the NEG: Turnbull's new climate and energy policy
• Turnbull's change to suit the political climate
• PM's energy policy seeks to cut costs, mandate use of 'reliable' coal, gas
• Tony Abbott launches warning shot on climate policy

The World Is Going Slow On Coal, But Misinformation Is Distorting The Facts

The Guardian - Adam Morton

A recent story on 621 plants being built globally was played up in various media – but the figure is way off the mark

China still uses a stack of coal but data shows it has stopped construction at 33 sites in the past three months. Photograph: Kevin Frayer/Getty Images

This is a story about how misinformation can take hold. It’s not always down to dishonesty. Sometimes it’s just a lack of time, a headline and the multiplying power of ideological certainty.
Last week, China announced it was stopping or postponing work on 151 coal plants that were either under, or earmarked for, construction.
Last month, India reported its national coal fleet on average ran at little more than 60% of its capacity – among other things, well below what is generally considered necessary for an individual generator to be financially viable.
Neither of these stories gained much of a foothold in the Australia media. But one story on global coal did: that 621 plants were being built across the planet.
The line was run in print, repeated on national radio and rippled out on social media among likeminded audiences. Some politicians and commentators claimed it showed it was strange, maybe even ridiculous, that MPs, financiers and energy companies said new coal power stations had no role to play in Australia.
But the figure is wrong. Way off, in fact. According to the most recent data, there are 267 coal stations under construction. More than 40% of those are not actually new ones, but expansions of existing generators.

Global coal power construction as at July 2017

A bit of background: the figure dates back to 19 June, when Nationals senator John “Wacka” Williams asked the parliamentary library to answer a few reasonable questions. How many coal plants are there in other countries? How many have been built recently or are being built? How many have closed? According to the parliamentary library analysis, he wanted the answers by 4pm the same day.
Fast forward to September, and the Australian ran a page one story quoting the analysis under the headline “World building new coal plants faster than it shuts them”. The Oz (correctly) reported that the library found 621 coal-fired power units were being built. This was mis-repeated by several people who don’t accept that climate change is a present threat – including blogger and broadcaster Andrew Bolt and government backbench energy and environment committee chair Craig Kelly – as 621 plants being built.
In reality, coal power stations are usually made up of several units. Victoria’s Hazelwood, which shut in March, had eight. But the distinction mattered little once Bolt had provided the shareable online headline: “New coal-fired power stations: World 621, Australia zero. Now understand?”
While the stations/units confusion is relevant, it is not the main issue. The 621 is incorrect, however you cut it.By the time it appeared in the media, it was more than a year out of date. How do we know? The guy behind the data that was the initial source for the library analysis says so.
The parliamentary library used as its source the Comstat Data Portal, a trade-focused African website not known for its energy expertise. As the library noted, the African portal copied its data from the Global Coal Plant Tracker, the widely respected database run by US-based anti-coal organisation CoalSwarm and used by the OECD, International Energy Agency and Bloomberg publications. But none of the players involved in spreading this story in Australia contacted CoalSwarm directly to check if the African database was accurate.
It’s not. Ted Nace, the director of CoalSwarm, says there appeared to be numerous transcription errors. More significantly, the data on Comstat is out of date – from August last year. It did not reflect that new construction of coal plants plummeted in 2016 and 2017 following declines in construction in China and India.
More coal-fired capacity is still being built than closed each year, though the gap has narrowed significantly.

Global coal power capacity built and retired, 2010-2017

Guardian Graphic | Source: Global Coal Plant Tracker, July 2017 *(up to July)

But, crucially, coal stations are not being used as much. The amount of electricity produced across the planet by burning coal has fallen each year since 2013.
“A distinction needs to be kept in mind between capacity and electrical output,” Nace says. “Even though there are more power plants, the actual production of electricity from those plants – and likewise the amount of coal used worldwide – has fallen every year since 2013, with a small drop in 2014 and larger drops in 2015 and 2016.”

Yearly change in coal production, 2010-2016

Guardian graphic | Source: BP Statistical Review of World Energy

The parliamentary assessment, and subsequent reporting, would have benefited from a closer glance at a report released in March by CoalSwarm, Greenpeace and the Sierra Club. Titled Boom and Bust 2017, it found an extraordinary 62% drop in new coal plant construction across the globe last year, and an 85% fall in new coal plant permits in China.
Analysis of CoalSwarm’s database shows that in July, construction was taking place at 300 plants globally. Of those, 183 were new power stations and 117 extensions of existing plants. But that number is changing rapidly.
As in so many things, the extraordinary story in coal comes from China. It still uses a stack of it, and is still building plenty of power stations. But according to a breakdown of the latest cancellation data announced last week by Simon Holmes à Court, senior adviser at the University of Melbourne’s energy transition hub, it stopped construction at 33 sites in the past three months alone.
It means that since July, the number of new coal stations being built in China has fallen from 103 to just 74. There has also been a slight decrease in the number being expanded, down to 46. The reason? A glut in the Chinese electricity market. The Institute for Energy Economics and Financial Analysis found its coal fleet ran at only 47.5% capacity last year.
India is the other big player, with 45 power stations under construction – 19 new plants and 26 being expanded. While debate continues to rage over whether the Australian government should subsidise Adani’s planned giant export coal mine in outback Queensland, existing Indian coal plants – including those owned by Adani – are struggling.
Among countries comparable to Australia in terms of development, Japan – which signalled it would make a significant investment in coal after shutting down its nuclear fleet following the Fukushima disaster six years ago – has 14 construction projects, many of them small by Australian standards.
Germany has been held up by lobby group the Minerals Council of Australia as an industrialised country investing in “high efficiency, low emissions”, or HELE, coal technology. It has one station under construction. Building work at what is known as Datteln 4 started a decade ago next month. After several delays, it is due to be commissioned next year.
It is the only coal station being built in western Europe. Britain’s Conservative party has promised to phase out coal by 2025, and Justin Trudeau’s Canadian government by 2030. The two countries last week said they would work together to push other countries to join them. Despite Donald Trump’s grand promises about reviving the coal industry, there are no new stations under construction in the US.
What does all this mean for Australia? In terms of the political debate, probably very little. Given the modern aversion to the persuasive power of evidence, misinformation will find a way.
But don’t let yourself be kidded into thinking only local investors are leaving coal behind.

Links

• Tony Abbott needs to explain U-turn on climate change, Julie Bishop says
• New coal plants have a role in Australia's energy future, Josh Frydenberg says
• Alan Finkel defends clean energy target as Coalition turns its back
• Government 'clean coal' push would be likely to make Australia's emissions worse
• Hard facts unmask the fiction behind Coalition's 'coal comeback'
• Scott Morrison brings coal to question time: what fresh idiocy is this?
• Why coal-fired power handouts would be an attack on climate and common sense
• How Malcolm Turnbull could ignore the facts and fund the myth of 'clean' coal
• Australia dubbed 'fossil of the day' after lobbying for coal mine at climate talks
• Australian unions call for 'just transition' from coal-generated electricity