Failure Atop Failure: Turnbull’s NEG

Written by:
13 November 2017
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The government’s National Energy Guarantee is not the knockout blow in Australia’s energy wars. Rather, it marks a continuation of three decades of failed energy policies.

We shouldn’t buy the spin that the government is doing away with subsidies for renewables. The NEG differs to the Renewable Energy Target (RET), the Clean Energy Target (CET), and the carbon tax only by degree and not kind.

Try to spot the difference. The carbon tax punished high-emissions and favoured low-emissions technology, causing a move from coal to renewables. The RET forced retailers to purchase a certain amount of energy from renewable energy generators, causing a shift from coal to renewables. The CET would have required retailers to purchase a certain amount of energy from low-emissions technology, causing a shift from coal to renewables (with some room for clean coal). Similarly, the NEG will require energy retailers to meet emission reduction targets which will, you guessed it, cause a shift from coal to renewables (again, with some room for clean coal).

Australia committed the original sin of energy policy by embracing emissions reductions three decades ago. Unfortunately, this original sin was committed by the notionally conservative Howard government which, in 1997, released its climate change policy manifesto Safeguarding the Future: Australia’s Response to Climate Change. Amongst other measures, the strategy saw the introduction of the first incarnation of the RET which required electricity retailers to source an additional two per cent of their electricity from renewable sources by 2010. A modest intervention, to be sure. But from little things, big things grow.

This flawed energy policy will continue under the government’s latest proposed scheme, which would require Australia to meet its Paris Climate Agreement commitments through reducing emissions by 26 to 28 per cent on 2005 levels by 2030.

This means Australian governments will continue with the fiction that reducing emissions is in our national interest. It plainly isn’t. Forget the criticisms of climate science (which have been extensively outlined in the IPA’s Climate Change the Facts: 2017), or the Bureau of Meteorology’s recent admission that temperature readings have been wrong for at least two weather stations for a number of years – Australia accounts for just 1.5 per cent of global greenhouse gas emissions. And this is forecast to fall to just 1 per cent over the coming decades. Moreover, total global emissions from humans are only 3 per cent of total annual emissions. This means that even if Australia were to completely de-industrialise, and end all manufacturing and heavy industry (the green-left’s dream) there would be no noticeable difference to the global climate.

So is there anything new about the NEG? Well, the government is proposing to introduce a so-called ‘reliability guarantee’ to sit next to (read: undo the damage of) the emissions reductions guarantee. This would require energy retailers to offset their purchases of renewable energy with additional ‘dispatchable’ energy – energy generation that can be increased at short notice – such as coal. Yes, this will improve reliability. But surely it would be easier to just remove the cause of poor reliability – favouritism to renewables flowing from emissions reductions targets – rather than implementing costly offsetting regulations and imposing more red tape on industry.

Indeed, the NEG takes Australia one step closer to out-right re-nationalisation of energy generation. The increasingly complex array of directions from government to private enterprise will prove costly and unworkable. Once the NEG breaks down an even louder chorus of cries from the left to re-nationalise will emerge in response to the supposed failure of a market that was never allowed to operate as a market.

It is true that the government’s proposal will be less destructive than what the ALP is offering. Under Labor, approximately 60 per cent of energy generation will come from renewables by 2030, compared to an estimated 28 to 36 per cent under the government’s plan. This means Australia would undoubtedly see higher electricity prices, less supply reliability, and a concomitant greater risk of black-outs under a future Labor government.

The government should also be congratulated for exposing the damaging role state governments have played in the energy market. Indeed, state governments should use this opportunity to walk away from their renewable energy targets and open up gas reserves. Failing that it is imperative that the Coalition and Liberal National Party state oppositions commit to abolishing state-based RETs should they win government, as the oppositions in South Australia and Victoria have already done (although the South Australian opposition has also committed to a moratorium on the extraction of gas in the state’s south-east).

However, a policy which is less bad than Labor’s doesn’t make it good. And this is the perennial problem the Coalition faces. Having totally ceded the ground to the left on values, the Coalition has largely been reduced to a political force that technocratically implements, oversees, and administers policies based on those flawed values. Energy policy based on emission reductions, education policy based on government direction rather than parental choice, a large welfare state rather than civil society, or punitive personal income and businesses taxes rather than rewarding success, are policies driven by left-wing values.

The government needs to break out of this mould and offer a distinctive, alternative platform. For energy policy, this means dispensing with the fiction that the ‘arc of history’ bends toward renewable energy and lower emissions. The world’s second-biggest emitter of carbon dioxide, the United States, has withdrawn from Paris Climate Agreement. The world’s biggest emitter, China, is building new coal plants every year. And some 1,600 coal plants are planned or under construction in 62 countries. Of course, a change in direction would require the type of conviction that the Coalition is sadly lacking in.

The only sure way to deliver affordable and secure energy is to remove policies that artificially promote unaffordable and intermittent renewable energy. To do this the government must untether energy policy from emissions reductions requirements by withdrawing from the Paris Climate Agreement. This would ensure that the electricity market promotes the interests of Australian families, consumers, and businesses, rather than green energy lobbyists and Davos globetrotters.

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