Queensland Economic Advocacy Solutions

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Queensland should support the NEG – when perfection and politics are the enemy of good

In true Better a diamond with a flaw than a pebble withoutfashion - Queensland should support the proposed National Energy Guarantee this Friday when COAG's Energy Council meets to consider it.

If you believe the hype - the National Energy Guarantee will deliver lower electricity prices, improve reliability, encourage the right investment, provide certainty, reduce emissions without subsidies, taxes or trading schemes whilst at the same time being truly neutral to solar, wind, coal, gas, batteries or pumped storage.

To quickly provide background - the NEG is essentially made up of two guarantees for energy retailers across the National Electricity Market:

  • A reliability guarantee will be set (by Australian Energy Market Commission and Australian Energy Market Operator) to deliver the level of dispatchable energy needed in each state; and
  • An emissions guarantee will be set to contribute to Australia’s international commitments. The level of the guarantee will be determined by the Commonwealth and enforced by the Australian Energy Regulator (AER).

What I particularly like about the NEG is its simplicity – energy retailers will have to contract in and buy a set level of reliable energy to keep the power on and a set level of low-emissions energy to help the energy sector hit its share of the Paris Agreement emissions reduction of 26-28 per cent by 2030.  The beauty of this policy is that it can be scaled up or down for the government-of-the-day's emissions ambitions and accordingly has a chance of receiving bi-partisan support.

Green groups will naturally argue that the NEG does not go far enough to cut energy sector emissions.  This is what I mean by it will never be perfect so surely something good is better than no policy at all. Representatives of Australia's biggest employers, small businesses, the energy industry and the agricultural sector have rallied behind it and have urged federal, state and territory leaders to put aside politics and ideology and support the implementation of the NEG.  Together these organisations represent businesses that employ five out of six working Australians and contribute more than 80 per cent of economic output in this country. To my mind that's quite a voice and should listened to.

Unfortunately it may be process that ends up being the enemy of good.  If agreed to by the COAG Energy Council, Energy Minister Josh Frydenberg then has to get agreement from the Coalition’s party room.  This is not only problematic in getting the Coalition on the one page but the Palaszczuk Government now has hesitation because the NEG can be tinkered with following COAG agreement  - equating it to a blank piece of paper that the Premier is not prepared to sign off on.  Whilst not entirely correct, the Premier’s comments do have some merit and I would think it not too unreasonable for the Coalition to respect the potential agreement arrived at this Friday. 

But at the same time, this is not grounds for the State Government to play politics itself and baulk at policy that will yield benefit on prices, reliability, certainty and the planet. The NEG is not perfect but it is certainly better than no policy at all or uncompromisingly partisan policy. 

The NEG summary:

  • Retailers must have contracts in place to support a minimum amount of dispatchable energy to meet consumer and system needs.
  • The average emissions level of electricity sold to consumers must meet the electricity sector's share of Australia's international emissions reduction commitments.
  • Australia's current target is to reduce 2005 level emissions by 26 to 28 per cent by 2030.
  • The Energy Security Board estimates typical household bills will fall by an average of $110-$115 per year over the 2020-2030 period.
  • Renewables will make up 36 per cent of national energy market generation within 11 years, up from the current 17 per cent.
  • Without closing any coal-fired power stations, the share of coal-fired power generation will fall to 60 per cent from 75 per cent.


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