What is the National Energy Guarantee and will it really reduce electricity prices?
THE National Energy Guarantee is designed to end the “electricity wars” over how to reduce prices and carbon emissions. But how does it work, and why are people still arguing over it?
National
Don't miss out on the headlines from National. Followed categories will be added to My News.
Q What is the National Energy Guarantee and how will it work?
A The NEG was designed by the Federal Government’s Energy Security Board. It would require electricity retailers and major users to meet a reliability guarantee by sourcing a minimum proportion of their supply from “dispatchable sources”, which can be switched on at a moment’s notice to meet demand. Dispatchable sources could include gas, coal, pumped hydro and batteries.
Retailers would also have to comply with a carbon emissions cap. The Government wants the cap to be consistent with its plan to reduce greenhouse gas emissions by 26 per cent of 2005 levels by 2030.
Q Will the NEG reduce power prices?
A Modelling shows that energy prices should fall by an average of $550 next decade. About $150 of the reduction would be directly attributable to the NEG, but some critics argue the modelling is unreliable.
Q What’s not to like about cheaper power prices, a more blackout-resistant electricity grid and lower carbon emissions?
A These are the three pillars upon which the National Energy Guarantee is based. Unfortunately, the nation’s politicians seem unable to agree on whether it will actually work in practice.
Q What happens next?
A The NEG can’t go ahead unless the states and territories agree. Federal Energy Minister Josh Frydenberg will meet with his federal and state counterparts on Friday to discuss the plan. The Labor governments of Victoria, Queensland and the ACT have indicated that they won’t sign off on the plan unless it is endorsed by a meeting of Coalition MPs and senators next week. The South Australian Government is broadly supportive but wants to ensure there is nothing in the NEG which could disadvantage the state. Victoria says the plan should require states such as NSW to do more to reduce their carbon emissions.
Q Will the Coalition party room endorse the plan?
A This is almost a certainty. However, some conservative backbenchers want a price guarantee included in the plan. Some right-wing Liberals and Nationals are critical of the inclusion of emissions reduction measures in the NEG and want the Government to offer financial support for the construction of a new coal-fired power station.
Q Why are federal Labor and some green groups critical of the NEG?
A Labor energy spokesman Mark Butler says the NEG could actually result in higher power costs and a less reliable energy network because it will discourage investment in renewable energy. Labor believes the 26 per cent emissions reduction target isn’t ambitious enough and a national target of 45 per cent should be set. Green groups have similar concerns.
Q What do business groups say?
A Major business groups support the plan. They say it will deliver much-needed power reductions for big energy users, including manufacturers and mining companies. They say energy policy certainty is needed to allow major investments to go ahead.
Q Is there room for a compromise?
A The Federal Government has indicated the emissions reduction target could be reviewed in several years and adjusted. NEG supporters are hopeful that Labor states and the Federal Opposition will allow it to be implemented based on the understanding they could make adjustments in the future. The Turnbull Government is also promising other measures to bring down power prices, including tougher consumer protections.
Q What happens if an agreement proves impossible?
A Australia’s climate change and electricity wars will continue. The threat of higher electricity prices and a lack of investment in new power plants could cause voters to punish politicians who fail to help fix the problem.
Originally published as What is the National Energy Guarantee and will it really reduce electricity prices?