I have this piece in this morning’s Australian which addresses the direction of energy and climate policy in light of Josh Frydenberg’s Press Club address. Aside from demonstrating how the renewable program has wrecked the electricity supply industry and brought a doubling of prices, it has two main themes.
First, it demonstrates that government statements bend the truth in saying that the National Energy Guarantee (NEG) will be neutral between energy sources.
The NEG will be set to achieve aspirations for a level of greenhouse gas emissions from the electricity sector in line with the government’s Paris commitments on greenhouse gas emissions and will oblige suppliers to adjust their energy sources accordingly. It is, in short, a mechanisms under which suppliers contract more renewable energy than they would without the NEG and less from fossil fuel generators. This is accomplished by, in effect, the fossil fuel generators paying a price penalty and the renewables getting a price bonus.
Secondly, there’s the Liddell closure issue. Supply security and price is uppermost in the battleground over this and has brought calls for some Coalition MPs for direct investment in new coal fired generators. The outgoing head of the electricity industry lobby group, Matthew Warren thinks the planned Liddell closure would not be a problem but politicians and regulators are not so confident.
The government is resisting calls for direct investment
“but leaning heavily on AGL to keep Liddell open – the firm’s claims that its alternative investments will be superior just do not pass the credibility test. AGL has said it needs policy certainty. A prominent ALP spokesman, Nicholas Reece, made it clear on Wednesday night’s Bolt program that a Shorten Government would not permit Liddells’ closure prior to 2025.”
In other words, we have bipartisan policy that will ensure the plant is kept open – and it is a safe bet that the ALP would be more ruthless in ensuring this than the Coalition.
One important feature of the address by Josh Frydenberg was his observation that the renewable industry is adamant that it is now competitive with fossil supplies but equally resolute in demanding on-going subsidy programs to effect this.
The Minister says that wholesale prices are likely to fall a bit. Maybe, but we won’t see the $40 per MWh level that prevailed before politics destroyed our competitive supply. Interestingly Josh Frydenberg also says the forward price of RET contracts is falling (to $38 per MWh from $80). What this means, even if the wholesale price for electricity falls to $70, (AGL said it had contracted wind at “$60 real” for five years) renewables need $108 per MWh to be viable. Some way from parity with the Minerals Council’s research showing even High Efficiency Low Emissions coal generators may require as little as $40 per MWh to be viable.
Meanwhile, someone has leaked Ben Potter at the AFR (Clue? see the pic of Vic Minister Ambrosio with Al Gore) a copy of the latest officials’ NEG report. His article misses the big picture but allows him to say that the draft “won’t require electricity contracts to specify physical sources of generation or privilege coal generation over other forms of on-demand supply that can “firm” up intermittent wind and solar energy”.