The NEG is Australia's latest move to support coal

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Ilaria Valtimora
November 3, 2017
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The NEG is Australia's latest move to support coal

He was meant to be the fresh start. But Australia’s Prime Minister Malcolm Turnbull, like his predecessor Tony Abbott, could not make clearer his aversion to renewables.

In mid-October, the Australian federal government announced a new energy plan, called the ‘national energy guarantee’ (NEG). In this the government refuses to adopt a clean energy target after 2020; scraps support for renewables; and requires companies to use a percentage of electricity from "reliable" sources like coal.

It should go without saying that none of this is promising for wind, but it is even more galling given that Australia’s government has toyed with the idea of greener policies.

For example, in June the nation's chief scientist Alan Finkel said the government should adopt a post-2020 clean energy target (CET). This would replace the current federal renewable energy target (RET), due to expire in 2020. The RET aims for 33TWh of renewable generation by 2020 after being slashed two years ago.

But, last month, Turnbull decided against Finkel’s proposal and opted for the NEG. This could have a big impact on renewables.

First, the NEG means that renewables including wind would get no support from the government from 2020. Turnbull said this is because green sources of energy are now financially viable with no government help. He has a point here.

Second, the NEG would require companies to fulfil an ‘emissions guarantee’ and a ‘reliability guarantee’. This means they would have to buy power with low emissions, and also to buy enough reliable power, by which it means electricity can be provided to the grid at any time. These rules would be set by each state.

This definition of reliable power – also known as ‘dispatchable power’ – is yet to be determined. But forcing companies to buy it seems a very obvious way to support traditional sources such as coal and gas, as well as hydro and batteries.

The official line is this would reduce power bills for consumers. The Australian Competition & Consumer Commission said residential electricity prices have risen by 63% in the last decade. Australia's leaders have said the NEG would help push down typical houshold electricity bills by between A$110 and A$115 each year between 2020 and 2030, which seems like a lot so we'll treat it sceptically.

But the underlying argument here is that wind is volatile and wind drives up prices. Remember how keen Turnbull was to claim that wind farms had caused blackouts in South Australia last year.

What consequences would the NEG would have on renewables? The biggest risk we see is to discourage spending on wind and solar, and bring a new rise of coal-fired power stations. Origin Energy has already told its shareholders that the NEG means it might keep the nation’s largest coal-fired power plant open longer.

A preliminary analysis from the Energy Security Board after the announcement of the NEG suggested the new plan would lead to 28%-36% renewable energy in Australia’s electricity mix by 2030. It is an underwhelming figure that would entail the development of between 250MW and 670MW of new wind and solar each year from 2020 to 2030. That is in contrast to what is happening now.

The renewables industry in Australia is enjoying its largest period of investment in the last 50 years. In May, the Clean Energy Council reported that more than $2bn worth of renewables projects have won financial backing in the first quarter of 2017, adding up to an unprecedented $7.4bn of investment and over 3.3GW of new renewables capacity that will be on-site or completed in 2017.

If the Energy Security Board is right than that momentum could be completely lost.

But we aren’t there yet. States like Victoria and South Australia have shown they support wind. Meanwhile, the levelised cost of wind keeps falling, which can address the government’s concerns about high electricity bills; and wind is proving to be more reliable than Turnbull and his political kin like to make out. Technology and attitudes are both evolving. This one will run and run.

He was meant to be the fresh start. But Australia’s Prime Minister Malcolm Turnbull, like his predecessor Tony Abbott, could not make clearer his aversion to renewables.

In mid-October, the Australian federal government announced a new energy plan, called the ‘national energy guarantee’ (NEG). In this the government refuses to adopt a clean energy target after 2020; scraps support for renewables; and requires companies to use a percentage of electricity from "reliable" sources like coal.

It should go without saying that none of this is promising for wind, but it is even more galling given that Australia’s government has toyed with the idea of greener policies.

For example, in June the nation's chief scientist Alan Finkel said the government should adopt a post-2020 clean energy target (CET). This would replace the current federal renewable energy target (RET), due to expire in 2020. The RET aims for 33TWh of renewable generation by 2020 after being slashed two years ago.

But, last month, Turnbull decided against Finkel’s proposal and opted for the NEG. This could have a big impact on renewables.

First, the NEG means that renewables including wind would get no support from the government from 2020. Turnbull said this is because green sources of energy are now financially viable with no government help. He has a point here.

Second, the NEG would require companies to fulfil an ‘emissions guarantee’ and a ‘reliability guarantee’. This means they would have to buy power with low emissions, and also to buy enough reliable power, by which it means electricity can be provided to the grid at any time. These rules would be set by each state.

This definition of reliable power – also known as ‘dispatchable power’ – is yet to be determined. But forcing companies to buy it seems a very obvious way to support traditional sources such as coal and gas, as well as hydro and batteries.

The official line is this would reduce power bills for consumers. The Australian Competition & Consumer Commission said residential electricity prices have risen by 63% in the last decade. Australia's leaders have said the NEG would help push down typical houshold electricity bills by between A$110 and A$115 each year between 2020 and 2030, which seems like a lot so we'll treat it sceptically.

But the underlying argument here is that wind is volatile and wind drives up prices. Remember how keen Turnbull was to claim that wind farms had caused blackouts in South Australia last year.

What consequences would the NEG would have on renewables? The biggest risk we see is to discourage spending on wind and solar, and bring a new rise of coal-fired power stations. Origin Energy has already told its shareholders that the NEG means it might keep the nation’s largest coal-fired power plant open longer.

A preliminary analysis from the Energy Security Board after the announcement of the NEG suggested the new plan would lead to 28%-36% renewable energy in Australia’s electricity mix by 2030. It is an underwhelming figure that would entail the development of between 250MW and 670MW of new wind and solar each year from 2020 to 2030. That is in contrast to what is happening now.

The renewables industry in Australia is enjoying its largest period of investment in the last 50 years. In May, the Clean Energy Council reported that more than $2bn worth of renewables projects have won financial backing in the first quarter of 2017, adding up to an unprecedented $7.4bn of investment and over 3.3GW of new renewables capacity that will be on-site or completed in 2017.

If the Energy Security Board is right than that momentum could be completely lost.

But we aren’t there yet. States like Victoria and South Australia have shown they support wind. Meanwhile, the levelised cost of wind keeps falling, which can address the government’s concerns about high electricity bills; and wind is proving to be more reliable than Turnbull and his political kin like to make out. Technology and attitudes are both evolving. This one will run and run.

He was meant to be the fresh start. But Australia’s Prime Minister Malcolm Turnbull, like his predecessor Tony Abbott, could not make clearer his aversion to renewables.

In mid-October, the Australian federal government announced a new energy plan, called the ‘national energy guarantee’ (NEG). In this the government refuses to adopt a clean energy target after 2020; scraps support for renewables; and requires companies to use a percentage of electricity from "reliable" sources like coal.

It should go without saying that none of this is promising for wind, but it is even more galling given that Australia’s government has toyed with the idea of greener policies.

For example, in June the nation's chief scientist Alan Finkel said the government should adopt a post-2020 clean energy target (CET). This would replace the current federal renewable energy target (RET), due to expire in 2020. The RET aims for 33TWh of renewable generation by 2020 after being slashed two years ago.

But, last month, Turnbull decided against Finkel’s proposal and opted for the NEG. This could have a big impact on renewables.

First, the NEG means that renewables including wind would get no support from the government from 2020. Turnbull said this is because green sources of energy are now financially viable with no government help. He has a point here.

Second, the NEG would require companies to fulfil an ‘emissions guarantee’ and a ‘reliability guarantee’. This means they would have to buy power with low emissions, and also to buy enough reliable power, by which it means electricity can be provided to the grid at any time. These rules would be set by each state.

This definition of reliable power – also known as ‘dispatchable power’ – is yet to be determined. But forcing companies to buy it seems a very obvious way to support traditional sources such as coal and gas, as well as hydro and batteries.

The official line is this would reduce power bills for consumers. The Australian Competition & Consumer Commission said residential electricity prices have risen by 63% in the last decade. Australia's leaders have said the NEG would help push down typical houshold electricity bills by between A$110 and A$115 each year between 2020 and 2030, which seems like a lot so we'll treat it sceptically.

But the underlying argument here is that wind is volatile and wind drives up prices. Remember how keen Turnbull was to claim that wind farms had caused blackouts in South Australia last year.

What consequences would the NEG would have on renewables? The biggest risk we see is to discourage spending on wind and solar, and bring a new rise of coal-fired power stations. Origin Energy has already told its shareholders that the NEG means it might keep the nation’s largest coal-fired power plant open longer.

A preliminary analysis from the Energy Security Board after the announcement of the NEG suggested the new plan would lead to 28%-36% renewable energy in Australia’s electricity mix by 2030. It is an underwhelming figure that would entail the development of between 250MW and 670MW of new wind and solar each year from 2020 to 2030. That is in contrast to what is happening now.

The renewables industry in Australia is enjoying its largest period of investment in the last 50 years. In May, the Clean Energy Council reported that more than $2bn worth of renewables projects have won financial backing in the first quarter of 2017, adding up to an unprecedented $7.4bn of investment and over 3.3GW of new renewables capacity that will be on-site or completed in 2017.

If the Energy Security Board is right than that momentum could be completely lost.

But we aren’t there yet. States like Victoria and South Australia have shown they support wind. Meanwhile, the levelised cost of wind keeps falling, which can address the government’s concerns about high electricity bills; and wind is proving to be more reliable than Turnbull and his political kin like to make out. Technology and attitudes are both evolving. This one will run and run.

He was meant to be the fresh start. But Australia’s Prime Minister Malcolm Turnbull, like his predecessor Tony Abbott, could not make clearer his aversion to renewables.

In mid-October, the Australian federal government announced a new energy plan, called the ‘national energy guarantee’ (NEG). In this the government refuses to adopt a clean energy target after 2020; scraps support for renewables; and requires companies to use a percentage of electricity from "reliable" sources like coal.

It should go without saying that none of this is promising for wind, but it is even more galling given that Australia’s government has toyed with the idea of greener policies.

For example, in June the nation's chief scientist Alan Finkel said the government should adopt a post-2020 clean energy target (CET). This would replace the current federal renewable energy target (RET), due to expire in 2020. The RET aims for 33TWh of renewable generation by 2020 after being slashed two years ago.

But, last month, Turnbull decided against Finkel’s proposal and opted for the NEG. This could have a big impact on renewables.

First, the NEG means that renewables including wind would get no support from the government from 2020. Turnbull said this is because green sources of energy are now financially viable with no government help. He has a point here.

Second, the NEG would require companies to fulfil an ‘emissions guarantee’ and a ‘reliability guarantee’. This means they would have to buy power with low emissions, and also to buy enough reliable power, by which it means electricity can be provided to the grid at any time. These rules would be set by each state.

This definition of reliable power – also known as ‘dispatchable power’ – is yet to be determined. But forcing companies to buy it seems a very obvious way to support traditional sources such as coal and gas, as well as hydro and batteries.

The official line is this would reduce power bills for consumers. The Australian Competition & Consumer Commission said residential electricity prices have risen by 63% in the last decade. Australia's leaders have said the NEG would help push down typical houshold electricity bills by between A$110 and A$115 each year between 2020 and 2030, which seems like a lot so we'll treat it sceptically.

But the underlying argument here is that wind is volatile and wind drives up prices. Remember how keen Turnbull was to claim that wind farms had caused blackouts in South Australia last year.

What consequences would the NEG would have on renewables? The biggest risk we see is to discourage spending on wind and solar, and bring a new rise of coal-fired power stations. Origin Energy has already told its shareholders that the NEG means it might keep the nation’s largest coal-fired power plant open longer.

A preliminary analysis from the Energy Security Board after the announcement of the NEG suggested the new plan would lead to 28%-36% renewable energy in Australia’s electricity mix by 2030. It is an underwhelming figure that would entail the development of between 250MW and 670MW of new wind and solar each year from 2020 to 2030. That is in contrast to what is happening now.

The renewables industry in Australia is enjoying its largest period of investment in the last 50 years. In May, the Clean Energy Council reported that more than $2bn worth of renewables projects have won financial backing in the first quarter of 2017, adding up to an unprecedented $7.4bn of investment and over 3.3GW of new renewables capacity that will be on-site or completed in 2017.

If the Energy Security Board is right than that momentum could be completely lost.

But we aren’t there yet. States like Victoria and South Australia have shown they support wind. Meanwhile, the levelised cost of wind keeps falling, which can address the government’s concerns about high electricity bills; and wind is proving to be more reliable than Turnbull and his political kin like to make out. Technology and attitudes are both evolving. This one will run and run.

He was meant to be the fresh start. But Australia’s Prime Minister Malcolm Turnbull, like his predecessor Tony Abbott, could not make clearer his aversion to renewables.

In mid-October, the Australian federal government announced a new energy plan, called the ‘national energy guarantee’ (NEG). In this the government refuses to adopt a clean energy target after 2020; scraps support for renewables; and requires companies to use a percentage of electricity from "reliable" sources like coal.

It should go without saying that none of this is promising for wind, but it is even more galling given that Australia’s government has toyed with the idea of greener policies.

For example, in June the nation's chief scientist Alan Finkel said the government should adopt a post-2020 clean energy target (CET). This would replace the current federal renewable energy target (RET), due to expire in 2020. The RET aims for 33TWh of renewable generation by 2020 after being slashed two years ago.

But, last month, Turnbull decided against Finkel’s proposal and opted for the NEG. This could have a big impact on renewables.

First, the NEG means that renewables including wind would get no support from the government from 2020. Turnbull said this is because green sources of energy are now financially viable with no government help. He has a point here.

Second, the NEG would require companies to fulfil an ‘emissions guarantee’ and a ‘reliability guarantee’. This means they would have to buy power with low emissions, and also to buy enough reliable power, by which it means electricity can be provided to the grid at any time. These rules would be set by each state.

This definition of reliable power – also known as ‘dispatchable power’ – is yet to be determined. But forcing companies to buy it seems a very obvious way to support traditional sources such as coal and gas, as well as hydro and batteries.

The official line is this would reduce power bills for consumers. The Australian Competition & Consumer Commission said residential electricity prices have risen by 63% in the last decade. Australia's leaders have said the NEG would help push down typical houshold electricity bills by between A$110 and A$115 each year between 2020 and 2030, which seems like a lot so we'll treat it sceptically.

But the underlying argument here is that wind is volatile and wind drives up prices. Remember how keen Turnbull was to claim that wind farms had caused blackouts in South Australia last year.

What consequences would the NEG would have on renewables? The biggest risk we see is to discourage spending on wind and solar, and bring a new rise of coal-fired power stations. Origin Energy has already told its shareholders that the NEG means it might keep the nation’s largest coal-fired power plant open longer.

A preliminary analysis from the Energy Security Board after the announcement of the NEG suggested the new plan would lead to 28%-36% renewable energy in Australia’s electricity mix by 2030. It is an underwhelming figure that would entail the development of between 250MW and 670MW of new wind and solar each year from 2020 to 2030. That is in contrast to what is happening now.

The renewables industry in Australia is enjoying its largest period of investment in the last 50 years. In May, the Clean Energy Council reported that more than $2bn worth of renewables projects have won financial backing in the first quarter of 2017, adding up to an unprecedented $7.4bn of investment and over 3.3GW of new renewables capacity that will be on-site or completed in 2017.

If the Energy Security Board is right than that momentum could be completely lost.

But we aren’t there yet. States like Victoria and South Australia have shown they support wind. Meanwhile, the levelised cost of wind keeps falling, which can address the government’s concerns about high electricity bills; and wind is proving to be more reliable than Turnbull and his political kin like to make out. Technology and attitudes are both evolving. This one will run and run.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.