Josh Frydenberg at the Press Club: The Energy Statement We’ve Been Waiting For
On Wednesday the Minister for Energy and the Environment, Josh Frydenberg, appeared at the National Press Club to explain why Australia needs a National Energy Guarantee (NEG).
He said that he wanted to make three points: firstly, he said that the traditional energy system had been turned on its head and disrupted in recent times; secondly that we were paying a high price for the ideological debate over energy and climate change; and finally that the NEG is the best way to guarantee energy reliability and affordability while meeting Australia’s climate change commitments.
The Minister said that, in the year 2000, the National Electricity Market (NEM) had just three wind farms and two tiny solar farms generating less than 0.1% of supply while more than 90% of power came from fossil fuels.
Less than 1% of households had solar panels, with the rest drawing energy from the centralised grid and its large spinning turbines.
Smart meters, peer-to-peer energy trading and home batteries were still a fledgling idea.
Today the shape of the market could not be more different. Over the last five years, more than 90% of new generation has been wind and solar.
During the last decade one third of our coal fired power stations have closed and gas prices on the east coast have nearly tripled as parity pricing with the international market takes hold.
Consumers, who once sat passively at the end of the supply chain, receiving a homogenous product from state owned utilities, are now empowered through technology to choose how and when power is generated, stored and used.
Now 20% of Australian homes have solar panels which, on a per capita basis, is the highest in the world. Mr Frydenberg said that, when the NEM was simply concerned with the delivery of energy which predominately came from coal and gas, the established market signals worked and low wholesale prices followed but now the new requirement of emissions reduction has been added to the mix and the penetration of renewables has increased.
The NEM is no longer delivering the consistently low wholesale prices and the effective signal for new investment which were its hallmarks. It is within this new paradigm that policy must be reframed.
On his second point Mr Frydenberg said energy policy in Australia is no longer simply an economic issue, it has also become a cultural one.
As politicians set their battlelines, it is consumers who are the casualties and the future of energy policy must be determined by the proper consideration of the public’s best interest, not ideologically driven predisposition.
The answer lies neither in a war on coal nor the nationalisation of our energy assets.
When it came to climate change he said that Australia would over achieve its Paris commitments.
The government’s approach to a solution was to implement the National Energy Guarantee.
The NEG is a mechanism which uses the existing electricity market, both spot and contract, where energy is already being traded between buyers and sellers.
Mr Frydenberg said the NEG places an obligation on retailers to provide sufficient dispatchability to ensure reliability – this is power on demand regardless of the weather – while also requiring retailers to reduce the emissions intensity of their portfolio over time.
This is fundamental to restoring faith in the NEM by driving long term investment in the right technologies at the right place at the right time – an outcome that has to date escaped policymakers both here and abroad.