The End of the Week Could See the End of the NEG
This coming Friday is the day when the future of the National Energy Guarantee will be determined.
The Council of Australian Governments Energy Ministers Council has to decide whether to endorse a package that combines emission reductions with energy certainty.
As late as this weekend the future of the NEG is uncertain.
The Greens, GetUp and Greenpeace are pressuring the Victorian government to scuttle it and, if Victoria votes against it, then the ACT and Queensland are likely to join.
There are options other than total rejection by the states: they could give the NEG conditional support subject to it being approved by the Coalition party room and the federal Parliament.
This brings the conservative wing of the Liberals and the Nationals into play and puts the acid on the federal opposition to declare where it stands.
It’s more likely that Victoria will adopt the delay tactic rather than scupper the NEG completely.
If it vetos the agreement Daniel Andrews’ government will carry the blame for blocking the agreement into the next state election.
In the context of an election campaign it would be a big ask to defend the proposition that it opposed an arrangement that would lower power prices for Victorian households and guarantee power for important Victorian manufacturers.
However Victorian Energy Minister, Lily D’Ambrosio, has toughened her position on the NEG this week.
She said Victoria was unhappy that the Commonwealth wanted to lock in a low emissions reduction target for a decade.
She said the emissions reduction target had to be scalable, a position which federal Energy Minister, Josh Frydenberg, has already rejected.
But Ms D’Ambrosio is in all sorts of trouble over the shenanigans with the ‘red shirts’ at the last state election which could see her facing criminal charges.
With the states wavering, the chair of the Energy Security Board, Kerry Schott, on Wednesday launched a strongly worded plea for agreement on the NEG at the next meeting of the COAG Energy Ministers Council, warning that “any delay, or worse a failure to reach agreement, will simply prolong the current investment uncertainty and deny customers more affordable energy.”
The problem with debate about the NEG is that it confuses ideology with evidence based policy.
The demand for a bigger emission reduction target after 2020 is purely ideological.
The difficulty is compounded by the Energy Security Board’s refusal to release its modelling.
However a range of energy economists believe that, although the renewable energy target will be reached before the NEG comes into effect, the amount of renewable generation will continue to increase and emissions will fall after 2020.
It is important that the federal government maintains its opposition to subsidies for power generators after 2020.
This will ensure certainty in the market that will encourage more investment and drive prices down.
If an ideological, ‘picking winners’ approach is adopted then power consumers will end up being gouged by rent seekers.
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