Assessing Turnbull’s New Energy Policy

The Magical New Energy Guarantee

Various developments emerging since yesterday’s Commentary suggest that the quick decision to establish a new National Energy Guarantee (NEG) may largely reflect concerns by Turnbull about his continued poor polling and that “something needs to be done” to repair that.

The proposal for a NEG emerged last week in response to a request for energy policy advice from the Turnbull government from the hitherto little known Energy Security Board (ESB), which was only established in July  but which is now claimed by Turnbull to constitute “real experts” in the national energy market (why  weren’t they used during the long period when T was trying to determine an energy policy). At yesterday’s press conference with Turnbull, his “Yes Minister” Environment Minister and the ESB board members (see PM, Frydenberg and ESB Press Conference), the representative of the Australian Energy Regulator (who is one of the “experts” on the ESB board) gave an explanation of how NEG would work that is incomprehensible to me. He explained that the estimate of the savings from NEG of $110-$115 pa for households reflected “an average for ten years” but he said he did not have the numbers for each year! This, he explained, would “come out of the more detailed modelling we will do in the lead-up to COAG” (hence implying that the present estimate is tenuous at best). It is little wonder that, when asked, Turnbull, refused to give a guarantee of price reductions. More generally, a reading of the text of this press conference indicates that the NEG system (sic) had not been considered in any detail before being launched –it has gone out half-cocked!

It appears that the idea is that the ESB would use the NEG as the basis for ensuring that the source of power each energy retailers will be able to use will be consistent with the objectives of providing reliable power and at the same time lowering emissions each year (one of the plethora of other government energy agencies, such as the Australian Energy Regulator and the Australian Energy Market Operator may also be involved in this exercise). The approved sources of power will include coal and gas as well as renewable and, according to Turnbull, no one “technology” will be favoured. Yet this NEG system will supposedly provide lower electricity prices even while forcing reductions in carbon emissions by 26-28 per cent by 2030, which would add to costs of production as a result of reducing the usage of the cheaper coal-fired generators (one reported estimate is that the electricity industry would have to reduce its emissions by 40-55% by 2030). While subsidies for new renewable projects will cease after 2020 ( subsidies policy for “old” projects is not clear),this is more likely to add to prices than help reduce them.

As indicated by The Australian’s chief economist, David Uren, “the notion this policy will reduce power bills by $115 as preliminary analysis claims, is pure fantasy. Instead it will push prices higher” (see Uren on New Energy Policy). Terry McCrann, who reaches the same conclusion, also observes that watching yesterday’s press conference “I had an overwhelming sense that I was watching an exercise in pointlessness. That I was witnessing another one of those Turnbull “light bulb moments” which would just fade away” (see McCrann on New Energy Policy).

One of the “details” yet to be settled is whether NEG will be agreed at the COAG meeting now to be held next month. As reported in the media, Labor Premiers do not support it (see Labor States Response to New Energy Policy). This situation is not only relevant to what Turnbull might claim as an “achievement” from establishing the NEG.   There is also a question regarding the legal powers of the ESB to force energy retailers to have the right mix of sources in the electricity they supply.  The most recent bulletin of the ESB says that “the ESB will not be established in law” but will be governed by a Terms of Reference as issued by the Energy Council and that these Terms of Reference “are still being finalised”. If the ESB is not established in law, and the members of the Energy Council include state representatives, it may be difficult to enforce what energy sources the retailers have to use (see Powers of Energy Security Board). There is also a  question as to whether Commonwealth legislation will be needed.

Abbott Address Publicity Widens Further

Melanie Phillips, who is an experienced British journalist, author, and public commentator, has written that  “The Australian politician Tony Abbott has delivered a really terrific speech on the AGW scam to the Global Warming Foundation. What was so good was that he placed the fake science of anthropogenic global warming theory squarely in its correct and all-important context – the suicidal attack by the west upon its own civilisation and the principles underpinning it, including the pursuit of rationality and evidence-based inquiry” (see Melanie Phillips on Abbott Speech).

In selling the new energy policy, Turnbull claimed “the climate wars are over”. More likely, his NEG has enhanced them.