Page 2602 - Week 07 - Thursday, 2 August 2018
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RepuTex modelling again demonstrates that a NEG with a more ambitious emissions reduction target would save households significantly more when it comes to energy bills. Of course, that applies to businesses as well. Having a higher target makes sense not only for environmental reasons but also for economic reasons.
Numerous energy experts are questioning the assumptions relied upon in the cost modelling. It has been disappointing to see that the full economic modelling has not been made available as part of the discussions in the lead-up to next week’s COAG Energy Council meeting.
It is interesting that the modelling claims that the NEG will reduce electricity bills by $550 a household. But only $150 of this is actually attributed to the NEG. That reflects the fact that the influx of renewable energy suppliers into the market is reducing the energy cost even under business as usual conditions. That needs to be reflected on thoughtfully as we debate these complex topics. As noted economist Ross Garnaut recently said, it is renewable energy technologies, the very ones that the NEG will stymie because of its design and lack of ambition, that will deliver a “decisive reversal of the relentless and immense increase in electricity prices”.
Reliability is another key factor in this discussion. We know that there are going to be coal exits. Coal plants will reach the end of their natural life, and close, over the coming 10 to 15 years. We have already seen that with the Hazelwood coal-fired power station. That closed not because of climate policy or because of a government decision; it closed because the private owners of the Hazelwood coal-fired power station decided simply that it was not economic to keep refurbishing it. They were not prepared to invest the hundreds of millions of dollars that were needed to keep that plant viable. That has led to substantial energy price rises in the wholesale market over the past couple of years.
That points to the fact that we need an orderly transition, and we need to recognise the fact that the private owners of these coal-fired power stations will make rational, self-interested decisions that will have an impact on all of us. We cannot leave it for those driving market forces. That is market failure. What happened with Hazelwood was a terrible market failure. Governments need to step up and ensure that we do not have those sorts of random events having such a significant impact on Australian households and businesses.
The modelling very clearly shows, and the Energy Security Board has provided charts that show this, that a number of coal-fired power stations are going to exit the system in the coming 15 years. We need to be preparing for that. At the moment, the national energy guarantee, in stymying the influx of new supply, will not prepare us for that transition, particularly as we see significant numbers of coal-fired power stations going out in 2032, 2033 and 2034. That is a time line that we need to be preparing for now. I do not think that the reliability mechanism as designed will address this either. It will simply provide the signals too late for what we know is coming down the line.
We also need an assurance that the NEG will not change or be traded for worse energy outcomes. I am concerned that ongoing uncertainty surrounds the NEG because of the continual debate at a federal level. We need confidence that the
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