NEG – who says it’s any good?

What the … NEG?

Hands up those who think the National Energy Guarantee is a smart blueprint for Australia’s energy future. Or for anyone who actually fully comprehends the thrust of the proposal. Judging by the reports on the NEG Forum held early this week the overriding consensus, if we can cast it that way, is widespread uncertainty.

Those who hail the NEG as the way forward and a sensible alternative to the clean energy target recommended in the Finkel review are as rare as a Tony Abbott visit to a solar farm.

The most commonly expressed concern is the NEG’s level of complexity, and as RenewEconomy noted it has been criticised for dodging actual policies on emissions reductions while threating to cement market power of the large players already dominating Australia’s electricity market, at a huge cost to consumers.

The big question mark hanging over the NEG is how it would, in a practical sense, compel retailers to meet emissions and reliability targets while combining climate and energy policy and reducing prices.

 In reality, there are deep and profound concerns about how, or if, it could work [and this shatters] the illusion that federal energy minister Josh Frydenberg has sought to create about the “wide support” of industry to the proposed NEG.”

Another concern raised at the forum was the process of the already too complex NEG generating jobs to a horde of bureaucrats.

 The Smart Energy Council’s government relations manager tuned in to the webinar and had this to say: “The National Energy Guarantee idea is a recipe for delay and inaction. What’s next? A high-level report will go to Energy Ministers in April, with a more detailed report in August.

“If all State and Federal Ministers agree to it in August – and that’s by no means guaranteed – officials will then start drafting changes to energy rules and legislation. That will then be subject to further consultation and we will be well into mid-2019 before anything happens.

“The Australian Government has no renewable energy policies beyond 2020 and the National Energy Guarantee debate ensures this will continue to be the case.”

Electricity analyst David Leitch of ITK commented the bad (NEG) news keeps rolling in and that most of the forum’s invited speakers expressed reservations of some sort, and virtually everyone he spoke to privately expressed strong reservations.

His take? That the NEG is largely a smokescreen designed to get the Finkel Inquiry’s recommendation of a Clean Energy Target off the front pages of the national press and “bury electricity policy under a motherhood blanket”.

Late last year chief scientist Alan Finkel addressed the Melbourne economic Forum where he said a failure to establish a clean energy target would create more uncertainty for investors and they would be faced with navigating different state policies.

And let’s not forget timelines. The Finkel Review took place over some time and was well considered, whereas the NEG was tacked together by the Energy Security Board in a matter of weeks, despite the irony that the policy is supposed to endure for decades.

And its major design issues have to be decided in weeks. David Leitch says.

“This is nuts. There is no rush. If the rush is about the Paris commitments, we just observe that electricity is 37 per cent of emissions and the Federal Government has done zero, nada, nothing, diddly-squat about the other 63 per cent.”

And reliability is no compelling factor, neither AEMO nor the AEMC foresee any energy reliability issues for at least three years.

David Leitch is guest speaker at the upcoming Smart Energy Conference where he will address the cost of dispatchable renewables and the market designs needed to support them. Maybe NEG will get a few dishonorable mentions.