Promised savings under NEG need closer inspection

9 August 2018
Sydney Morning Herald


Remember how Tony Abbott's promise to scrap the carbon tax was going to save the average Australian household $550 a year?   

In a coincidence befitting the deja-vuness of so much of our climate policy, annual savings to be generated from the Turnbull government's National Energy Guarantee are miraculously $550.

Few may remember pocketing the promised savings in 2014 as soaring power bills swallowed whatever dividend followed the carbon tax's demise.   


Likewise, households would be wise not to bank promises flowing from the latest "guarantee" - and not just because COAG energy ministers meeting in Sydney on Friday might veto it anyway.

Much attention has focused on the emissions goal - which Labor and the Greens dismiss as "pathetically low". The Turnbull government responds that it's in line with Australia's Paris Climate pledge to cut 2005-level pollution 26-28 per cent by 2030.


Lacking so far, though, has been a forensic assessment of whether the scheme is actually - as Environment and Energy Minister Josh Frydenberg stated on Wednesday - "a ticket to lower prices".

Examining models is typically complicated, and relatively dull for those more habituated to political argy-bargy and speculation.





Another reason is the Energy Security Board, the co-ordinating body, hasn't made it easy for number-crunchers to make their own assessment.

As independent Canberra-based analysts noted last weekend in a report for The Conversation, there's been "precious little detail" on how savings are derived.

Kerry Schott, the head of the board, told Radio National on Thursday that the modelling was "reasonably robust".

Deadline warning as ministers split on energy deal

A starting disadvantage, though, in achieving cheaper power is the scheme's byzantine complexity.

Electricity sector emissions must be cut in ways that mask a carbon price - otherwise the plan would be instantly dumped by Coalition MPs.

And so to that $550 saving, promised yearly over the policy's first decade from 2020.

From the Energy Security Board's final design report, we learn just $150 can be attributed to the plan itself. The source of the other $400 is hazy, although renewable energy projects already in the pipeline will boost supply and nudge prices lower.

But when the board states wholesale prices will be 20 per cent lower under the scheme than "no policy", analysts are doubtful since almost no new large-scale generating capacity is assumed to come online after 2020.


Details about the National Energy Guarantee, and what it does exactly, are scarce. But here's what we know so far.

"People with a great deal of expertise can't see how it adds up," says Frank Jotzo, the director of the Centre for Climate Economics and Policy at the Australian National University, and an author of The Conversation report.

Without extra capacity, the hunt for the source of those purported wholesale price falls takes a few obscure turns. It transpires much hinges on changes to trading within the National Electricity Market, the grid serving eastern Australian states including Tasmania.

Remember the plan is supposed to bolster grid reliability while cutting emissions - even if a major recent review found there's no pressing reliability issue.

It's assumed that because electricity retailers might need more of the type of generation instantly available - "dispatchable" - they will sign more contracts just in case. Contract coverage will grow by 5 percentage points, and spot prices will fall as a result of more supply being offered.

But Salim Mazouz, another of The Conversation report's authors and a principal at consultancy NCEconomics, is sceptical the price arrow from such a behavioural shift points down instead of up.

"Now retailers have to buy more dispatchable contracts and somehow that leads to lower prices for contracts themselves?" he says. Additional demand for anything usually has the opposite effect.

Another hint the market's not buying the modelling is that it predicts a total reduction of $27 billion for wholesale energy purchases over the decade, compared with a "no-policy scenario" .

AGL and Origin shares would be particularly vulnerable if that were true - and so far, nobody seems worried.

"It doesn't sound believable and, lo and behold, shareholders haven't believed it," Mazouz says.

The propaganda parrot BlackDay is doing a number for some Lefty/Greeny mob who want to make sure the NEG won't work.

Oh I am honored! The illustrious rtard Polly Waffle deigned to abuse me. Oh I am so excited.

Looks like the states have agreed to it in principle,  now Mals leadership is once again up for scrutiny as he tries to sell it to the rest of the party.

Bam wrote on Aug 10^th, 2018 at 9:10pm:


Let's see how much these conservatives differentiate themselves from damp squib