On the face of it, the National Energy Guarantee (NEG), adopted as Coalition policy at a party room meeting, appears to promise the certainty that industry, consumers and experts have desperately sought for the past decade. But beware: there is a renewable energy train coming down the track that is unstoppable.
The NEG cannot stop the train, but it could act as a guide rail to steer it – or even safely accelerate it - by reducing investment risk and lowering the cost of finance for renewable energy projects.
The latest figures indicate that the renewable energy train will smash Australia’s 2020 Renewable Energy Target. Assuming that the current pace of renewable energy investment continues (and there is good reason to expect that it will, given the unarguable economics of plummeting renewable energy prices worldwide), then the electricity sector would be on track to hit the government’s 26% emissions reduction target by 2030 with virtually no policy help at all.
The unstoppable renewable energy train may even end up contributing the lion’s share of the reductions needed to achieve Australia’s economy-wide target of cutting emissions by 26-28% relative to 2005 levels by 2030.
This would particularly be the case if we ramped up the electrification of other sectors such as transport and industry, and encouraged householders to replace gas with electricity for heating and cooking.
The big issue then would be whether the rest of the electricity system can adapt quickly enough as renewable energy reaches 50% and above. This would call for significant grid upgrades and storage systems, so as to provide efficient and reliable supply.
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