Politics editor Katharine Murphy explains what the Coalition’s new policy could achieve and what might stand in its way
Climate and energy policy is confusing, and it’s been a toxic mess for more than a decade. Malcolm Turnbull says his national energy guarantee is a “game changer” and represents genuine opportunity to end the climate wars. So what is this policy, and is the prime minister right?
The government wants to impose a reliability obligation and an emissions reduction on energy retailers and a small number of large electricity users. Reliable generation means dispatchable generation – power that can be ramped up within minutes as needs be. The emissions reduction requirement will force retailers to meet their obligations from power generation with a specified level of emissions intensity.
In plain English, this means retailers will have to have a mix in their portfolio: generation from dispatchable sources ready to fire up at the drop of a hat, and from low-emissions sources, to meet their regulatory obligations.
If energy retailers don’t meet their obligations after a reasonable period of time, there will be penalties. The government has flagged deregistering non-complying companies.
Part of the problem with the new policy is a lack of detail.
While energy policy changes in the past have been generally accompanied by white papers – Kevin Rudd’s carbon pollution reduction scheme was outlined in 2008 in two volumes spanning 820 pages, and the recent Finkel review was more than 200 pages – the detail for this proposal in the public domain is an eight-page letter from the Energy Security Board, a 12-page glossy, and a press release of a page and a half.
So what we have in the public domain at the moment are broad concepts, with details to be worked out in due course. If you were in an architect’s office, you’d be at the stage of a pencil sketch in a notebook for your new house, minus any of the dimensions.
Guardian Australia has also seen a background paper from the Australian EnergyMarket Commission which gives us a bit more information. That paper explains that retailers will need to establish a portfolio of contracts spanning their dual reliability and emissions reduction obligations, which is where it gets a bit technical.
The reliability obligation will require energy retailers to hold hedges in the form of forward contracts totalling a percentage of their forecast peak load. The amount of hedges required will be based on a system-wide reliability standard to be determined in the new framework. That process, which will be done state-by-state and carried out annually on a five-year forward planning basis, will identify capacity gaps.
The emissions reduction obligation adds to the reliability framework. In addition to the requirement to hedge their load, there will be a further requirement for energy consumption to meet a set emissions intensity target for the electricity sector.
That target will be set by the government. The government has signalled it will be in the order of a 26% reduction on 2005 levels by 2030. Tony Abbott willing. Yes, that’s a joke, but not a very funny one, given this legislation will have to clear the parliament, and Abbott is still naysaying.
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