What does the ‘energy revolution’ mean for the bush?​

Hope in National Energy Guarantee for heavy emitters like agriculture


National Issues
The potential for cheap emissions cuts in the power sector are off the table, for now, but that is not all bad news for the primary sector. Photo Brendan Esposito.

The potential for cheap emissions cuts in the power sector are off the table, for now, but that is not all bad news for the primary sector. Photo Brendan Esposito.

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Several ways heavy emitters can win from new power market plan

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After a decade of searching the Coalition’s National Energy Guarantee offers a potential fix to the previously intractable problem.

Cue the PM’s policy pronouncement last week of an “energy revolution” to tackle escalating power prices and the need to reduce carbon emissions. It could have significant consequences for other industries.

While analysts say they need more detail to predict what impact it will have on heavy emission industry, there are prospects of positive outcomes on several fronts.

Typically the energy sector is considered to offer the most economically efficient emissions reductions, especially as the cost of renewable sources such as wind and solar continues to fall.

But government has indicated the energy sector will be set the same target as Australia’s overall commitment under the Paris climate accord - that is 26-28 per cent emissions reductions on 2005 levels by 2030.

In short, this means there is less of a chance of an easy break for intensive emitters like agriculture and transport. 

University of Technology, Sydney Institute for Sustainable Futures research director Chris Dunstan said despite “a lot of devil in the detail” yet to be revealed, the energy guarantee was well structured, including the reductions requirement for the energy sector.

He praised the binding cap on emissions, as well as the mechanism that allows retailers who “overachieve” in emissions reduction to “assist” those who underachieve (Note: sound suspiciously like a carbon trading scheme, that is except to those within the Coalition party room).

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“Electricity is the biggest single source of emissions so getting it to contribute a proportionate share of reductions is not a bad place to start,” Mr Dunstan said.

“I would be surprised if other industry are forced to carry a much heavier load because of it.”

There would be room to tweak the reductions settings for different industries over time, and financial incentives for reduction strategies in agriculture and foresty, such as carbon sequestration, could be a boon to those industries.

“We don’t know enough yet to to say getting energy to overachieve is the lowest cost approach, especially given the potential for soil carbon offsets,” Mr Dunstan said.

He pointed out the cost of emission reduction in energy-dependent sectors may be offset by lower electricity prices delivered under the energy guarantee.

NSW Farmers chief economist Ash Salardini welcomed the policy, but questioned the political process.

“The Framework is good. It embeds environment policy in the electricity market, rather than housing it separately like in the clean energy target,” Mr Salardini said.

“The problem is not about the policy, it’s about gaining consensus for it and unfortunately the government hasn’t done enough to gain consensus with Labor and the states.

Mr Salardini said the benefit of the policy to rural and regional communities would remain unanswered until more detail was released.

“The potential to reduce power prices by more than $100 is fantastic news, but unfortunately people in the bush are already paying too much.

“But the main issue for us is it doesn't do a whole lot for rural and regional people. Their biggest cost is network charges, and their biggest problem is supply reliability.

“For example, the average household in Albury or Wagga  pays $300 to $400 too much on their annual bill and there is nothing in the policy to address that.”

The energy guarantee is set to kick in from 2020, pending approval from state governments who will have to implement the policy and crucially for the disrupted energy market, crying out for stability, Labor is yet to endorse the policy.

To deliver stability to supply, the energy guarantee requires electricity retailers source a set amount of power from dispatchable supplies, such as gas and hydroelectricity.

Where previous policies targeted electricity generation for emissions reduction, the policy demands retailers source power from low emissions supply. Companies can be deregistered if they fail to comply.

The mechanism is estimated to be able to achieve 36 per cent renewable energy take-up across Australia by 2030.

PM Malcolm Turnbull said the energy guarantee a win on electricity prices. On average, wholesale and household savings could be up to $115 a year from from 2020, he said.

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