Power ‘guarantee’ to fix crisis

Malcolm Turnbull to unveil his energy plan ending new subsidies for ­renewable energy and offering a lifeline to coal power.

Josh Frydenberg and Malcolm Turnbull yesterday. Picture: Kym Smith

Energy retailers will be forced to buy a minimum amount of baseload power from coal, gas or hydro for every megawatt of renewable energy under a drastic intervention into the energy market by the Turnbull government to drive energy bills down by $115 a year.

Malcolm Turnbull and Energy Minister Josh Frydenberg will today announce a “national ­energy guarantee” as the centrepiece of an energy plan that will end new taxpayer subsidies for ­renewable energy from 2020 and ­impose a 0.2 per cent reliability regulation on retailers to inoculate the system from blackouts and give a lifeline to coal power.

It is understood that under the new plan there will be a reliability guarantee and a separate emissions guarantee that will force ­retailers to buy a minimum amount of dispatchable power to reliably deliver baseload supply, effectively ending the flooding of intermittent power, from sources such as solar and wind, onto the market.

The rules will be imposed on a regional basis depending on the existing sources of energy, meaning states such as South Australia, which relies heavily on wind power, would be required to buy more, whereas coal-heavy states such as Queensland would be ­required to buy less.

A senior government source confirmed that the policy signed off by cabinet last night and to be taken to the Coalition partyroom today, is estimated to cut ­retail ­energy bills of between $100 and $115 a year.

Subsidies for new renewable energy supplies would also end with the Renewable Energy Target’s expiration in 2020. As ­expected the government will not adopt the recommendation by Chief Scientist Alan Finkel to ­replace it with a Clean Energy Target.

The imposition of new regulations on the sector constitutes a significant intervention in the ­National Electricity Market but would effectively give a lifeline to coal-fired power stations by mandating that retailers source a megawatt of power from dispatchable sources — coal, gas, hydro or storage — for every megawatt of ­renewable energy.

The Turnbull government’s policy is expected to equate to a ­renewable energy mix of between 28 and 36 per cent by 2050 compared with the 61 per cent effective renewable energy target adopted by Labor.

The plan acts on recommendations from the Energy Security Board, the peak group formed by the main energy regulators and backed by estimates showing the gains for consumers by putting downward pressure on prices.

While the CET would have ­required negotiations with Labor, the Greens or the Senate crossbench on the scale of the incentives for wind and solar, the new plan will take effect through the rules already put in place by federal and state governments.

Mr Turnbull and Mr Frydenberg will take the plan to a meeting of state and territory leaders, with a request to all sides to agree on the national ­approach or risk dragging out disputes that will pile more costs on to households and employers.

The new plan will heighten pressure on Bill Shorten over his uncosted policy to generate 50 per cent of the nation’s electricity from renewables by 2030, the central plank in his pledge to make deeper cuts to the nation’s greenhouse gas emissions.

The government, which is confident of reaching the Renewable Energy Target of 23.5 per cent by 2020, will today formally reject the CET, which forecast 42 per cent of electricity coming from renewables by 2030 — a figure that worried Liberal and ­Nationals MPs because it was seen as too close to Labor’s goal.

The blueprint to be unveiled will see an increase in renewable energy from 2020 to 2030 but the outcome will be well below the 42 per cent projection and will be expressed as a range, not a target.

The RET will be closed to new projects from 2020, as scheduled under current laws.

This means solar and wind generators have a two-year window to build new projects that gain subsidies funded by electricity customers.

The new guarantee will require electricity retailers to buy a set percentage of their energy from sources that are considered reliable or “dispatchable” — a category that includes coal, gas, pumped hydro, biomass and renewables backed by battery or other storage.

The reliability guarantee will start in 2019 and will be followed by a separate mandate to require electricity companies to buy a set percentage of their power from sources that are low in producing greenhouse gas emissions.

Drew Clarke, Mr Turnbull’s chief of staff between 2015 and this year, was last night tipped to be ­appointed as chairman of the Australian Energy Market Operator. Mr Clarke, who was appointed to the CSIRO and NBN Co boards in August, is a former secretary of the Department of Resources, ­Energy and Tourism, and Department of Communications.

Mr Clarke, as AEMO chair, would sit on the Energy Security Board.

Coalition MPs were yesterday hopeful the recalibrated policy would deliver swift electricity price relief to households and establish incentives for investment in baseload power generation over the long term, including coal-fired generators.

NSW Nationals senator John Williams welcomed a policy to focus on affordability and reliability of supply, arguing that moving away from a CET would force Mr Shorten into taking a carbon tax to the next election. “Labor was pushing for a huge clean energy target so they could drop their carbon tax/emissions trading scheme before the next election,” Senator Williams said.

“Getting a very high clean energy target means that they could drop the carbon tax. This is politics only for Bill Shorten.”

NSW Liberal MP Craig Kelly said any decision by Mr Shorten to oppose the new package would set up energy policy as a major election issue. “If Labor decides they want to not be in favour of low-cost energy, this becomes an enormous divide between the two parties,” Mr Kelly said.

Nationals MP Andrew Broad said it was important to free up gas supply as an immediate measure to put downward pressure on prices but argued longer term efforts needed to be made to reconfigure the national coal-fired power fleet.

Former resources minister Matt Canavan said he would ­reserve judgment until he saw the shape of the new package.

Additional reporting: Joe Kelly