National Energy Guarantee – Subsidies on renewables to be scrapped in 2020, businesses to save $115 per year

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The Government has formally ditched the Clean Energy Target for the new National Energy Guarantee which will push a return to coal, scrap renewables subsidies by 2020 and reduce renewable energy sources to less than 40% of the power mix by 2030.

Key Points:

  • Renewables to produce less than 40% of the power mix by 2030
  • Households to save an average of $115 per year
  • Renewables subsidies to be scrapped after 2020
  • Plan to kick in after RET expires in 2020
  • Coal is back in the mix

Renewables subsidies to be scrapped in 2020

The government, which yesterday approved the National Energy Guarantee, will remove the subsidies on renewables in order to ‘create a level playing field’. The current renewable energy target will end in 2020 with the government arguing that clean energy will be able to stand on its own two feet by then.

What remains to be seen is whether there will be any distinction between scrapping renewables subsidies on small-scale and large-scale renewable energy generation plants. The Australian Energy Regulator could step in to increase the 2018 target higher to mop up excess solar small scale certificates to encourage people to go solar now before the scheme ends. Whether it will do so or not, remains to be seen.

The National Energy Guarantee will kick in by 2020  and aims to save households and businesses an average $115 a year by requiring energy retailers to source a certain percentage of low emissions and dispatchable power.

It must also be noted that while savings are being projected, the savings will be made on what prices are in the future. With nothing to drive down the skyrocketing prices of electricity for another two years, the prices we will be paying in the future can be expected to be much higher than they are today, so consumers might well end up paying more than they are paying now, even with the projected savings in place.

Some analysts believe that the best-case scenario is that businesses and households will save $25 per year.

In addition, the government has not so far addressed the issue of short and medium-term energy costs. While it has announced that businesses will save $115 per year from 2020 through to 2030, the government has not stated the projections of what small to medium-sized businesses are expected to do in the grip of the current crisis until the new plan comes into effect in 2020.

National Energy Guarantee forces three-year notice of power station closures

Another key point is that power stations would have to give three years advance notice of mothballing, to prevent situations similar to when Victoria’s Hazelwood plant closed, pushing electricity prices through the roof.

The Clean Energy Target as proposed by Chief Scientist Alan Finkel would have boosted the amount of energy created from renewable sources to 42%.

Energy companies will be required to guarantee supply from sufficient base-load power.

The National Energy guarantee was designed by experts from the Energy Security Board, the Energy Market Commission, the Market Operator – AEMO and the Australian Energy Regulator.

It is understood that the plan was adopted by Cabinet on October 16.

The Energy Security Board was created following a recommendation from Dr Finkel to advise on a transition to a lower emissions energy system.

Foreign Minister and deputy Liberal leader Julie Bishop has described the decision as a “win for Australian consumers”, but Labor leader Bill Shorten has declared pro-coal former prime minister Tony Abbott “has won” and Greens leader Richard Di Natale said the move effectively throws Australia out of the Paris climate agreement.

Kane Thornton, from the Clean Energy Council, said it was difficult to see how this plan could achieve the emissions reductions required by Australia’s international obligations.

He said it seemed to assume that old coal-fired power stations would keep operating for longer.

We will bring you more news as we get it.

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