Farmers to assess Energy Guarantee’s impact on pricing crisis

A new policy approach was released today by Prime Minister Malcolm Turnbull and his Coalition government saying the Energy Security Board’s (ESB) recommendation for a new NEG would now be accepted to deliver more affordable and reliable electricity while meeting international greenhouse gas emissions reductions commitments.

The government’s move to end the climate wars by tasking the new approach, rather than a Clean Energy Target as per the Finkel review’s leading suggestion, came with an loose estimate that typical household bills would fall by an average of $110-$115 per year from 2020 to 2030.

But while environmental groups, the Opposition and the Greens predictably slammed the move, the National Farmers’ Federation (NFF) said its judgement on the merits of the new energy policy would be reserved until details were examined on its effectiveness to meet the farm sector’s energy needs.

The NFF said Australian agriculture had been direct in its call for government to find durable policy solutions to fix the broken National Electricity Market (NEM) and to ensure electricity supply was affordable, reliable and had a clear pathway to lower emissions.

NFF President Fiona Simson said throughout the country producers like dairy farmers, fruit and vegetables producers and irrigators “are hurting from spiralling electricity prices and unreliable power supplies”.

Ms Simson said businesses that value-add products once they leave the farm gate - packing sheds, food manufacturers, abattoirs, dairy factories, cotton gins and rice mills - also all needed affordable energy sources.

But she said the NFF would not be “hasty” in casting judgement about the NEG based on a press release and a few newspaper reports, following today’s announcement.

"Rather, we will work through the settings to understand what the proposed rules could mean for the agriculture sector and rural and regional Australia, more broadly,” she said.

"The NEM is complex.

“The NFF will take its time to consult with our members who include State representative bodies and commodity groups."

Ms Simson said yesterday’s Preliminary Report on Retail Pricing released by the Australian Competition and Consumer Commission highlighted the market dominance of a few big players, a lack of retail competition and past over-investments to 'gold plate' network assets, as key to driving electricity prices higher.

“As it stands, we've not seen any significant movement to address these issues and we must be confident that any new policy would not compound these problems,” she said.

Ms Simson said the farm sector was Australia’s fastest growing industry and the largest contributor to gross domestic product growth which in 2016-2017 was worth $60 billion to the nation’s economy.

But she said the industry “simply cannot withstand the continuation of the status quo when it comes to energy”.

While there was much complexity to work through, the policy concept put forward by the government had the potential to deliver the technology neutral, market-based mechanism the NFF had been calling for, she said.

"To this end we acknowledge the government’s work in tackling the energy challenge, and we look forward to a responsible and detailed discussion to ensure we get the policy settings right,” she said.

The NFF is currently in the process of shaping an energy policy by merging its revamped climate change policy, with its existing electricity policy.

When the Finkel review was released earlier this year, detailing its 50 recommendations, Ms Simson said the national electricity system was “untenable” and the Renewable Energy Target (RET) was due to end in 2020 but nothing existed beyond it.

But NFF member group Farmers for Climate Action said of new policy revealed today, the Coalition government’s had “turned its back on a clean energy future that would protect agriculture from the worsening impacts of climate change”.

The group’s CEO Verity Morgan-Schmidt said the government was “walking away from a clear and coherent pathway to a clean energy future and abandoning any pretence of supporting Australian farmers”.

“Farmers across Australia are hurting: squeezed between the twin challenge of climate change and energy price rises - they now know that the Nationals and rural Liberals are not standing up to protect their long-term interests,” she said.

“It is utterly incomprehensible that any sane government would move away from renewable energy technology and act to deter investment in an industry that could revitalise rural communities, and bring down electricity prices.

“We’re calling on the government to demonstrate how this approach will adequately address emissions and provide long-term certainty for the renewable energy sector.”

Ms Morgan-Schmidt said the government’s policy would result in further uncertainty, rising power prices and rising pollution.

Speaking for the group, NSW sheep farmer Peter Holding said “This demonstrates a catastrophic failure in political leadership and an utter failure to act on the issues that matter most to Australian farmers”.

“The Turnbull government is locking Australia in to a future of rising emissions, rising prices and dependence on 19th century technology,” he said.

“Walking away from the Clean Energy Target shows that our farmers are being ignored.

“Now is the time for our rural and regional MPs to stand up for regional Australia.”

But Mr Turnbull said the Guarantee was made up of two parts that would require energy retailers across the NEM to deliver reliable and lower emissions generation each year.

He said a reliability guarantee would be set to deliver the right level of dispatchable energy - from ready-to-use sources such as coal, gas, pumped hydro and batteries - needed in each state.

It will be set by the Australian Energy Market Commission (AEMC) and Australian Energy Market Operator (AEMO), he said.

Mr Turnbull said the level of the guarantee would be determined by the Commonwealth and enforced by the Australian Energy Regulator (AER).

Mr Turnbull said the policy released today was “a game changer” that would deliver affordability, reliability and responsibility.

“Why is it so much more affordable than other models?” he said.

“It provides investor certainty, which the market has been crying out for, for a long time.

“It reduces volatility, which, of course, has been driving up prices.

“It builds on so many other measures we have undertaken - making sure there is sufficient gas on the east coast market.”

Mr Turnbull said the NEG would 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,” he said.

“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 subsidised.

“Importantly, this plan builds on the Finkel Review, which recommended the creation of the ESB that has now recommended the National Energy Guarantee.

“The government will now work with the ESB and the states through COAG to implement the National Energy Guarantee.

“As well as delivering a better deal for households, the plan will support business, particularly emissions intensive, trade exposed firms.”

Environment and Energy Minister Josh Frydenberg said it was a “credible, workable, pro-market policy that delivers lower electricity prices”.

“It means no subsidies, no taxes, no trading systems and what it does do is it creates a more reliable, affordable energy system which helps us meet our international commitments,” he said.

“It builds on the work, the excellent work of the Chief Scientist Alan Finkel.

“We accepted 49 out of the 50 recommendations, and obviously, this is a response to his 50th, which was the Clean Energy Target.

“And it provides us with a mechanism to deal with our Paris commitments and commitments into the future.”

Transport Minister Darren Chester said large energy users including farmers, hospitals and manufacturers in his Gippsland electorate would benefit from the Guarantee.

The Australian Forest Products Association welcomed the government’s commitment to “reward” biomass in the NEG, indicated it understood Australia’s continuing energy crisis and the underutilised benefits of renewable bioenergy.

But Labor Shadow Climate and Energy Minister Mark Butler said the new policy was “a guarantee without a guarantee” and federal cabinet had adopted a national energy policy without any economic modelling or a Regulatory Impact Statement.

“It’s quite extraordinary that the Turnbull government has signed off on its latest energy policy without economic modelling and therefore not being able to guarantee a supposed guarantee,” he said.

“Malcolm Turnbull turned his back on his own Chief Scientist and the coalition of support that existed for a Clean Energy Target and he turned his back on renewable energy in Australia.

“Instead, he embraced Tony Abbott’s vision of Australia and a coal-fired future.

“This government appears to be hell bent on destroying renewable energy, or at least severely restricting its growth in Australia over the coming few decades.

“Malcolm Turnbull’s capitulation to Tony Abbott’s hard right-wing agenda for Australia is now utterly complete.”

Mr Butler said Labor’s position was clear, that Australia should have at least 50 per cent of its electricity delivered by renewable energy by 2030.

“We have said that there is a range of mechanisms that can deliver that outcome,” he said.

“Initially we were in support of an Emissions Intensity Scheme, as was the government until December last year.

“The question in front of us is how do you put in place an investment framework that will pull through investment in the electricity industry that keeps reliability in place, alongside a generator reliability obligation, that puts downward pressure on power prices to deal with the affordability question, but also cleans up our electricity system; allows us, as a country that has such enormous renewable electricity resources to take part in this investment revolution sweeping the globe in renewables.”

Australian Greens climate change and energy spokesperson Adam Bandt said Malcolm Turnbull’s capitulation to Tony Abbott was “finally complete” and the former PM had “emerged victorious on climate change policy”.

“This is the policy you get when you capitulate to the climate terrorists on your backbench - this is a policy of appeasement designed to please Tony Abbott and the other Trumps on the backbench,” he said.

“Malcolm Turnbull has served up a policy that means more coal and less renewables, which means more bushfires, worse heatwaves and longer droughts.

“Renewables mean lower prices because they are cheaper to build, cheaper to run and the fuel from the sun and the wind is free.

“The rest of the world is moving in one direction, embracing cheap, clean renewables and Australia is stuck in the dark ages trying to rub two sticks together.”

Australian Conservation Foundation CEO Kelly O’Shanassy said the latest energy plan from Mr Turnbull was a “grab bag of measures designed to placate big polluters and climate change deniers in his own party, while abandoning any credible effort to maintain a safe climate”.

“Since 2013 the only contribution the Turnbull and Abbott governments have made to climate and energy policy is chaos - abandoning a Clean Energy Target and backing more dirty coal is no exception,” Ms O’Shanassy said.

“To abandon a Clean Energy Target and allow coal to remain in the system longer is a reckless policy failure.

“The amount of clean energy the government has indicated this policy will deliver is nowhere near what Australia has to put in place to play its fair role in securing a safe climate.

“We are again selling short future generations by slowing the transition away from polluting coal and gas.”

But the Minerals Council of Australia said the NET was a “constructive approach” to addressing the long-running energy policy challenge confronting Australia.

It will be important for the government to consult with industry on the detailed design and implementation of the new Reliability and Emissions Guarantees, and any associated measures, MCA said in a statement.

“The MCA will continue to engage with government on the need for reliable, affordable and low emissions energy supplies to deliver a power system which restores Australia’s international competitiveness,” it said.