Extract from The Guardian
Energy Security Board issues final advice in bid to convince states to endorse Turnbull’s policy
The Turnbull government’s national energy guarantee will drive a
slight increase in the share of renewables in the electricity market
compared to a scenario where the policy isn’t implemented.
But emissions will also rise over the life of the scheme before pollution falls again towards the end of the decade to 2030.
The Energy Security Board on Wednesday circulated its final advice to state and territory energy ministers on the Neg, complete with a summary of the modelling underpinning the policy.
In an unusually strongly worded recommendation from an official, the ESB’s chair, Kerry Schott, pointedly warned the wavering members of the Coag energy council that delaying agreement on the Neg will “prolong the current investment uncertainty, and deny customers more affordable energy”.
The summary of the modelling provided to the jurisdictions by the ESB says the Neg will increase the share of renewable generation in the national electricity market from 17% in 2017-18 to 36% by 2029-30. Coal will account for more than 60% of all generation in 2029-30.
The modelling forecasts the Neg will drive a further commitment of 1,000MW of renewable generation.
Those increases compare to a “no policy” scenario.
In that scenario, the renewable share of generation would increase from 17% in 2017-18 to 34% by 2029-30, with the coal share still at 60%.
That head-to-head comparison suggests the Turnbull government’s policy will do almost nothing, in and of itself, to boost renewables in the system.
A graphical representation of the emissions trajectory during the decade of the Neg suggests carbon equivalent pollution drops in the first year of the scheme – reflecting a significant build of renewable energy under the existing renewable energy target – then it climbs again from 2022-23 through to 2028-29 before falling in the final year of the scheme.
The forecast says the Neg will lead to wholesale electricity prices being more than 20% lower, on average, between 2020-21 and 2029-30 than if the policy wasn’t implemented. The modelling assumes contracting increases under the Neg, which drives a significant reduction in spot prices, which causes contract prices and then wholesale electricity prices to drop.
While the Turnbull government has resisted calls for a higher emissions reduction target, largely because that would fracture the Coalition, the modelling summary also makes it clear the target could be increased by a future government without the higher pollution target affecting the operation of the scheme.
“The strong disincentives against non-compliance, including a penalty of up to $100m, allow the design to accommodate higher targets and ensure that market participants respond effectively to the investment signals provided by the guarantee,” the document says.
The modelling summary says if no policy was put in place, emissions would fall, then flatten out and rise towards the end of the decade to 2030 as forecast demand increases, then dip again in 2029-30.
If the Neg wasn’t implemented, the material says the national electricity market would “fall short of the emissions reduction target of 26% below 2005 levels”.
Energy experts have been calling for the release of the modelling to allow for more comprehensive examination of the scheme before the states are required to say yes or no at an upcoming meeting of the Coag energy council.
Dylan McConnell, a researcher at the climate and energy college at the University of Melbourne – one of a group who called for the full modelling to be released earlier this week – said the material circulated by the ESB on Wednesday was not a modelling document.
“It is impossible for researchers to validate the modelling on the back of this summary,” McConnell said. “The changes to the national electricity market are too significant to wave this through without proper examination. Researchers need the full modelling and access to the modelling team to conduct a peer review.”
With key states still on the fence, Schott has redoubled efforts to secure an agreement on the policy when the Coag energy council meets this month. She noted that 15 years of climate policy uncertainty had impeded investment, affected the security and reliability of the power system, and increased prices for households and businesses.
“The national energy guarantee can give the energy sector the confidence it needs to plan, source and invest over the longer-term in dispatchable, low emissions energy generation and demand-side energy resources in a transforming market,” she said.
“Once implemented, the guarantee will produce a clear investment signal so the cleanest, cheapest and most reliable generation can get built in the right place at the right time.”
The policy requires a sign-off from all members of the Coag energy council before it can be adopted. Victoria, Queensland and the Australian Capital Territory are yet to endorse the scheme, and have concerns the emissions reduction target is too low to allow Australia to meet its commitments under the Paris agreement.
Queensland and Victoria have raised concerns about the states being expected to give in-principle approval to the Neg before all the Coalition party room processes in Canberra are exhausted.
In an effort to keep the states at the table, the federal energy minister Josh Frydenberg has offered state ministers a 2024 review of the target, and a two-step process before sign-off.
The Coag energy council will meet on 10 August to consider the mechanism, and then there will be a second conversation on 14 August, where Frydenberg will show his counterparts the federal legislation giving effect to the emissions reduction components of the scheme after the package clears the Coalition party room.
The process the commonwealth envisages is in-principle agreement at the first meeting, conditional on the states having no concerns on 14 August.
But emissions will also rise over the life of the scheme before pollution falls again towards the end of the decade to 2030.
The Energy Security Board on Wednesday circulated its final advice to state and territory energy ministers on the Neg, complete with a summary of the modelling underpinning the policy.
In an unusually strongly worded recommendation from an official, the ESB’s chair, Kerry Schott, pointedly warned the wavering members of the Coag energy council that delaying agreement on the Neg will “prolong the current investment uncertainty, and deny customers more affordable energy”.
The summary of the modelling provided to the jurisdictions by the ESB says the Neg will increase the share of renewable generation in the national electricity market from 17% in 2017-18 to 36% by 2029-30. Coal will account for more than 60% of all generation in 2029-30.
The modelling forecasts the Neg will drive a further commitment of 1,000MW of renewable generation.
Those increases compare to a “no policy” scenario.
In that scenario, the renewable share of generation would increase from 17% in 2017-18 to 34% by 2029-30, with the coal share still at 60%.
That head-to-head comparison suggests the Turnbull government’s policy will do almost nothing, in and of itself, to boost renewables in the system.
A graphical representation of the emissions trajectory during the decade of the Neg suggests carbon equivalent pollution drops in the first year of the scheme – reflecting a significant build of renewable energy under the existing renewable energy target – then it climbs again from 2022-23 through to 2028-29 before falling in the final year of the scheme.
The forecast says the Neg will lead to wholesale electricity prices being more than 20% lower, on average, between 2020-21 and 2029-30 than if the policy wasn’t implemented. The modelling assumes contracting increases under the Neg, which drives a significant reduction in spot prices, which causes contract prices and then wholesale electricity prices to drop.
While the Turnbull government has resisted calls for a higher emissions reduction target, largely because that would fracture the Coalition, the modelling summary also makes it clear the target could be increased by a future government without the higher pollution target affecting the operation of the scheme.
“The strong disincentives against non-compliance, including a penalty of up to $100m, allow the design to accommodate higher targets and ensure that market participants respond effectively to the investment signals provided by the guarantee,” the document says.
The modelling summary says if no policy was put in place, emissions would fall, then flatten out and rise towards the end of the decade to 2030 as forecast demand increases, then dip again in 2029-30.
If the Neg wasn’t implemented, the material says the national electricity market would “fall short of the emissions reduction target of 26% below 2005 levels”.
Energy experts have been calling for the release of the modelling to allow for more comprehensive examination of the scheme before the states are required to say yes or no at an upcoming meeting of the Coag energy council.
Dylan McConnell, a researcher at the climate and energy college at the University of Melbourne – one of a group who called for the full modelling to be released earlier this week – said the material circulated by the ESB on Wednesday was not a modelling document.
“It is impossible for researchers to validate the modelling on the back of this summary,” McConnell said. “The changes to the national electricity market are too significant to wave this through without proper examination. Researchers need the full modelling and access to the modelling team to conduct a peer review.”
With key states still on the fence, Schott has redoubled efforts to secure an agreement on the policy when the Coag energy council meets this month. She noted that 15 years of climate policy uncertainty had impeded investment, affected the security and reliability of the power system, and increased prices for households and businesses.
“The national energy guarantee can give the energy sector the confidence it needs to plan, source and invest over the longer-term in dispatchable, low emissions energy generation and demand-side energy resources in a transforming market,” she said.
“Once implemented, the guarantee will produce a clear investment signal so the cleanest, cheapest and most reliable generation can get built in the right place at the right time.”
The policy requires a sign-off from all members of the Coag energy council before it can be adopted. Victoria, Queensland and the Australian Capital Territory are yet to endorse the scheme, and have concerns the emissions reduction target is too low to allow Australia to meet its commitments under the Paris agreement.
Queensland and Victoria have raised concerns about the states being expected to give in-principle approval to the Neg before all the Coalition party room processes in Canberra are exhausted.
In an effort to keep the states at the table, the federal energy minister Josh Frydenberg has offered state ministers a 2024 review of the target, and a two-step process before sign-off.
The Coag energy council will meet on 10 August to consider the mechanism, and then there will be a second conversation on 14 August, where Frydenberg will show his counterparts the federal legislation giving effect to the emissions reduction components of the scheme after the package clears the Coalition party room.
The process the commonwealth envisages is in-principle agreement at the first meeting, conditional on the states having no concerns on 14 August.
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