Prime Minister Malcolm Turnbull has finalised the Government’s new national energy policy, which does not adopt a Clean Energy Target (CET).

The government has decided not to adopt a Clean Energy Target, which was recommended by Australia’s Chief Scientist Alan Finkel in his final report of the Independent Review into the Future Security of the National Electricity Market.

The government previously agreed to implement 49 of the 50 recommendation by Dr Finkel to improve reliability and affordability of the national energy market, but decided to sign off on its new plan which drops the Clean Energy Target.

The CET would have mandated that a certain percentage of power be generated from gas and renewable energy.

Renewable energy will make up 40 per cent of the nation’s power mix by 2030 under the new policy.

As part of the new energy plan, Mr Turnbull said the government will accept the recommendation of the Energy Security Board (ESB) for a new National Energy Guarantee (NEG) to deliver more affordable and reliable electricity.

“The energy security board has recommended a way to deliver lower power prices and more reliable power supply as well as helping Australia meet its international commitments,” Mr Turnbull said.

While the government has not adopted his recommendation of a CET, Dr Finkel said other mechanisms could be used by the regulators to achieve the same goal.
“The Government’s commitment to a retailer obligation for low emissions energy under the National Energy Guarantee appears to be a credible mechanism,” Dr Finkel said.

The new policy aims to:

  • Ensure energy sources meet international commitments of reducing carbon emissions
  • Be technology neutral and have no subsidies, certificates or tax
  • Ensure power bills will be lower than forecast and lower than under a clean energy target
  • Enforce that energy companies guarantee the reliability of their supplies and how they will help meet emissions reduction targets

The guarantee is made up of two parts that will require energy retailers across the National Electricity Market to deliver reliable and lower emissions generation each year.

  • A reliability guarantee will be set to deliver the right level of dispatchable energy (from ready-to-use sources such as coal, gas, pumped hydro and batteries) needed in each state. It will be set by the Australian Energy Market Commission (AEMC) and Australian Energy Market Operator (AEMO)
  • 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)

Mr Turnbull said, “The energy security board has assured us the scheme will give certainty to investors, therefore encourage investment in all forms of power.”

Federal Minister for the Environment and Energy Josh Frydenberg agreed, saying the NEG guarantee builds on the existing energy policy but unlike previous approaches levels the playing field.

“It is truly technology-neutral, offering a future for investment in whatever technology the market needs – solar, wind, coal, gas, batteries or pumped storage,” Mr Frydenberg said.

“Coal, gas, hydro and biomass will be rewarded for their dispatchability while wind, solar and hydro will be recognised as lower emissions technologies but will no longer be subsidised.”

In a statement released by Origin the company said, “The National Energy Guarantee introduces a reliability and emissions obligation on retailers which we believe is consistent with these objectives

“Based on initial information we believe it is a solution that has potential, and we look forward to working with governments and energy market bodies to progress it.

Interim CEO of Energy Networks Australian, Andrew Dillon, said the focus on reliability and security in the new NEG was welcomed by Energy Networks Australia, but policy stability is essential if Australia is to see downward pressure on energy bills.

“While the Government’s commitments to target reliability and system security are important, any policy can only succeed if it can garner a broad political commitment that lasts beyond a single election cycle,” Mr Dillon said.

“The measures announced today will need careful review, but stable energy and carbon policy will help meet the grid modernisation challenge, keep the lights on and make power bills more affordable.

The Government will now work with the ESB and the states through COAG to implement the National Energy Guarantee.

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