24
Jul
2018

“Final” Version of NEG But Coal Still Favoured by Many

The Final Version of NEG

The Australian reports that the “final” version of NEG has now been sent to the states from where they will soon be leaked (see NEG “Finalised”). This version is to be considered at COAG next month and it appears that it does not include the mechanism for setting the emission reduction target, which are (amazingly) to be set each year under federal legislation. The responsibility for meeting the so-called “reliability obligation” is unclear as to what variation in supply, and from what fuel source, would be “unreliable”. No mention is made in this report of what is expected to happen to electricity prices.

Nor is there any indication of what happens if at least some of the states do not accept this version. That is in effect the case in the US, where California is attempting to be a strong reducer of carbon emissions while Trump has withdrawn from the Paris target mechanism and at the national level there is no target. Here some states have indicated that they will aim to reduce emissions by more than the 26-30% reduction agreed to by Turnbull in Paris in 2015. That appears to be the most likely outcome from the August meeting.

Letters Favour Coal

The Australian has also published some letters under the heading Evidence is piling up in favour of coal-fired power (see Letters on Coal). My letter, which is included in the group, is set out below. Unfortunately, the editor omitted the last three sentences which suggest that Frydenberg’s prediction of a fall in prices to 2030 is unbelievable and that the modeling included in the ESB report, which also predicts a major initial fall, needs to be thoroughly checked by an independent modeller

Evidence is piling up in favour of coal-fired power

Letter Published in the Australian on 24 July (Bits in square brackets omitted by Ed)

Terry McCrann shows that significantly expanding the source of power from wind turbines (now only 5 per cent) instead of from coal power would also require additional back up investments to ensure the regularity of supply now provided by coal. But this [major] additional investment would only be required for short periods, an uneconomic outcome that would need government financial support.

Yet the Turnbull government’s National Energy Guarantee climate policy does not recognise either this or the Australian Energy Market Operator’s view  that ageing coal-fired plants can deliver the cheapest electricity for the next twenty years. Realistically, it is impossible to keep existing coal generators providing cheap power (now over 60 per cent) and simultaneously cutting carbon emissions from that power’s source. One has to go, with significant implications for power prices.

A major reduction in coal generators would normally cause continually rising prices because the substitution of renewable adds considerably to the cost of production.  [Yet Frydenberg has predicted a 23 per cent fall on average over the decade to 2030 and claimed that as better than under Labor’s plan.  But this reflects modelling for NEG’s Energy Security Board by Frontier Economics.  The technology used is open to serious questioning and requires thorough checking.]

Des Moore, South Yarra

The Australian has also published an article on NEG by Judith Sloan (see Sloan on Renewable) which ridicules the references to prices, viz “Among the ridiculous claims the renewable energy sector continues to make is the idea that more renewable energy will lead to lower electricity prices. Of course our experience has been the reverse, but that doesn’t stop them throwing in the factoid that renewable energy is now the cheapest form of power — just don’t stop the subsidies, though”. But somewhat surprisingly her apparent frustration with the whole exercise leads her to conclude on NEG that “I can probably live with it. It’s also the only game in town. If prices could at least stabilise or fall slightly, that would be a better outcome than ongoing increases. We have been extremely foolish to get where we are, but let’s not forget that omelets are impossible to unscramble”. That shouldn’t be the conclusion of those who are not believers in dangerous global warming and government action to stop it.

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