20
Oct
2017

The New Energy Policy Has No Substance

Assessing NEG

In Wednesday’s Commentary I suggested that the explanation given by an “expert” as to how Turnbull’s NEG would work, and how NEG would save $110-115 pa in costs, was incomprehensible. This expert (John Pierce) was making the explanation at Turnbull’s request to a press conference whose attendants included Frydenberg  and board members of the recently established Economic Security Board (ESB), and whose role appears to be to ensure the provision of reliable power and the achievement of the emissions reduction target of 26-28% by 2030 (the text of the press conference is now attached to Wednesday’s Commentary on my web and is a “must read”). My guess is that the two ministers put together a group of “experts”  as members of the ESB who are sympathetic to the need for government intervention to reduce carbon emissions.

It should be noted that, after being head of the NSW Treasury for 12 years, Pierce was appointed by the (first) Rudd government as head of the Commonwealth Department of Resources in March 2009 but when that government ceased in June 2010, he became chairman of the Australian Energy Market Commission. He is reported in today’s Age as being the architect of NEG and as saying “We are not pricing carbon. What we are pricing is reliability; what we are pricing is the ability for the mechanism to be dispatched” (see Age Article Explains NEG). Some expert! I would be pleased if any recipients of this Commentary can explain what that means.

But this is not the only question posed by the article. Apart from quoting the absurd statement by Turnbull about physical trading (therefore no price is involved!), note in particular the article says that “Frydenberg sent the states a draft copy of a letter he wrote to Energy Security Board chair Kerry Schott on Thursday afternoon to request her input on more detailed modelling to confirm the claimed $115 household energy saving from the proposed policy” ie as I have previously reported, there is no sound basis to the estimate of the savings as announced. Interestingly, Rod Sims of ACCC seems to have been dropped as an expert for the moment.

I have also previously referred to the views of leading economic journalist (David Uren), who described the claimed savings under NEG as “pure fantasy”, and those of another leading journalist (Terry McCrann), who described the press conference as “an exercise in pointlessness”. A real expert on analyses of claims about global warming, Alan Moran, has also published a damning commentary on Quadrant Online (see Moran on Turnbull & His NEG). He refers to Turnbull’s claims that

“The National Energy Guarantee will lower electricity prices, make the system more reliable, encourage the right investment and reduce emissions without subsidies, taxes or trading schemes. It is truly technology-neutral, offering a future for investment in whatever technology the market needs – solar, wind, coal, gas, batteries or pumped storage.Unlike previous approaches, we are not picking winners, we are levelling the playing field. 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 subsidized”.

And justifiably concludes that “None of this is true”.

But possibly sensing that the apparent welcome from various quarters is not as strong as it seems, Turnbull is reported as indicating that he is prepared to do a deal with Labor (see Turnbull Could Do A Deal With Labor). It is possible that he sees himself a joint leader of both parties! But are the members of the Coalition prepared to contemplate an agreement with Labor on an energy policy which includes the economically damaging 26-28% emissions reduction target to 2030 and a continued subsidisation of renewable to 2020? If Turnbull guaranteed he would not change that in negotiations with Shorten would that be accepted as likely?

As Stone points out in an article in the latest Spectator (see Spectator Australia Article), the Coalition’s polling under Turnbull is actually worse than the latest TPP of 46/54. For example, for the last 15 Newspolls  its primary vote has been “at a catastrophic 37 per cent or less” (cf 41.8 per cent at the 2016 election). “As things stand, Turnbull politically is a dead man walking, politically speaking” and as more analysts realise the unworkability of NEG, the Coalition’s polling can only deteriorate further.

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