The NEG will bust the clean energy boom

2018-08-17

In this extract from his address to the Clean Energy Council last month, Richard Di Natale discusses why the National Energy Guarantee is poised to hamper real progress on climate change.


By Senator Richard Di Natale
 

I want to open with a story about an experiment conducted over 30 years ago in my former profession of medicine. The researchers wanted to assess the different factors that might make patients more or less likely to consent to a surgical procedure. The study showed that the way you ask the question makes a big difference.

People were more likely to consent to the surgery if the risks were presented as survival rates rather than as death rates, so you were more likely to agree if you were told that 99 out of 100 people survive the operation rather than if you were told 1 in 100 people die from it. Just asking the question in a different way produced a different result, despite the outcomes being identical.

It’s called framing. Framing happens all the time in politics. The debate about industrial relations is framed as work choices versus your rights at work. Debates about abortion are characterised as pro-choice by supporters and pro-life by opponents. If you want to cut taxes, you talk about tax burden and tax relief but if you want to increase them you talk about tax as the price society pays to fund quality, essential services.

The government is attempting the same strategy to fight your industry by trying to ‘frame’ the public debate in the terms they want and deflect the public’s support for clean energy.

They can’t win the debate on its normal terms, so they frame the public debate around concepts such as energy security and reliability, using meaningless terms like base-load power to highlight the so-called weakness of renewables, and of course using everyone’s favourite euphemism: ‘technology neutral’.

The entire energy debate has been constructed to frame the public debate around these themes, because they know they can’t win the debate if they frame it in terms of the things that matter: progress, lower prices, jobs, innovation, investment, and a modern clean economy.

Instead, they exploit the fact that energy policy is complex by deliberately framing the debate using measures that are largely irrelevant. The market has delivered reliability at a 99.998 percent standard – a standard that hasn’t been breached since 2009 and a standard the market will continue to deliver – with or without the National Energy Guarantee (NEG).

‘Reliability’ is a deliberate frame chosen to prosecute renewables as unreliable – pure and simple. If reliability was their concern, they would have mentioned the 72 times this year so far that coal plants in the NEM have tripped, dropping out huge amounts of load suddenly.

Changing the frame

For decades, the Greens have been fighting to change the frame.

For as long as I can remember, conservatives have been laying out a fake choice to voters that “it is jobs versus the environment”.

You see them do it with the Adani coal project – which they argue, falsely, will create thousands of jobs – but they are silent on the lost 70,000 tourism jobs along the Great Barrier Reef. And they consistently ignore the solar jobs boom in central Queensland that is already happening.

The environment and the economy have to move in the same direction. Without a healthy environment, industries can’t survive long term – whether it is farmers in the Murray Darling Basin, wine growers in South Australia or coal miners for domestic and export markets.

To accept that basic principle requires long-term thinking and putting the interests of people and the environment ahead of short-term corporate interests. That is why conservatives are railing against your industry and the future that comes with it.

The Greens know that a strong, modern economy requires a smooth, but rapid transition to clean energy. Every home and business needs energy.

But the NEG is a threat to our future. It holds back the transition. It will entrench the market power of the big three oligopoly – who the community despise more than banks, by the way – and it will keep coal in the system for longer, casting a dark shadow over the economic resilience of this country.

Australia is more exposed to the impacts of a changing climate than most others – as a food producing nation, as coastal dwellers and with a countryside vulnerable to bushfires destroying private property and public assets. Deloitte has put the figure of climate-induced natural disasters at $20 billion a year, every year from 2050, if we don’t embark on this rapid transition.

Now, I am sure some of you are nervous about the NEG being set aside. You want certainty – you are rightly rattled from the calculated investment freeze that Tony Abbott inflicted on industry and, of course, you are fearful of where energy policy will end up.

The Greens want certainty too. We want certainty for a stable climate system and stability for investment. But the NEG is a policy that has been twisted and contorted to fit inside a PR strategy. It is not a framework for industry certainty.

Unpacking the NEG

Let’s lay the NEG out on the table.

The Liberals like it because it puts a handbrake on renewables. Labor is keen to support something that means they don’t have to go to an election talking about climate and energy and risk another carbon tax scare. The incumbents like it because it shores up the power of the dominant 'gentailers'.

But what does it do for the wide scale deployment of clean technologies over the next decade?

Let's not forget that the NEG will replace the Renewable Energy Target. There will be no more support for renewable energy or storage technologies from here on in if it is adopted.

Oliver Yates, the former head of the Clean Energy Finance Corporation, called it straight and cut through all the layers of the NEG design, when he said:  the only thing Turnbull’s Energy Plan does is help coal companies to know they don’t have to reduce their pollution over the next 10 years.

The only true guarantee arising out of the National Energy Guarantee is that coal will have a better chance of staying in the system than it otherwise would.

The Greens agree with Mr Yates that the renewables industry would be better off with nothing, because the emissions targets baked into the agreement will be met by the time the NEG starts.

Wider impacts

So if it is no good for the renewables industry, what about the community?

First of all, if the emissions target drives no new clean energy investment and won’t change the energy mix, how can the framework possibly lower prices? Prices won’t just remain high, but all the complexity and compliance costs on retailers will get passed on to the community for little benefit.

No new clean energy, just an expensive PR strategy for science deniers, to be paid for through households and businesses’ energy bills.

Independent energy consultant Bruce Mountain says the NEG will result in a “straightforward transfer of wealth from the community to incumbent generators”. He says that the complexity of the scheme translates into "high search costs, windfalls, ineffective and expensive risk management and poor price discovery".

There is no example of a mechanism like this having been implemented anywhere, ever, nor has he found any literature that proposes such an approach.

If it won’t drive more renewables investment or lower prices then what about competition?

This scheme hands even more power to the big three retailers. They will have more market power by being able to pick and choose the generation that gets built to supply them to their best commercial advantage.

They can choose to either dominate further through the vertically integrated gentailer model or they can let the little guys in after using their market power to squeeze out as much profitability as they can from the company they are signing an offtake agreement with.

So what exactly is it that the NEG offers other than the hope of political stability?

It is, after all, the fifth best option after a carbon price, a renewable energy plus storage target, an emissions intensity scheme or a clean energy target.

All of these have been torn down by the Coalition, and who is to say that the NEG won’t be torn down too once they are out of office – if not before.

Let’s not forget: the model itself does not resolve the fundamental disagreement of whether Australia should reduce its levels of pollution or not.

Policy certainty is a mirage.

Greens in government

We now have enough detail about the scheme to say with confidence that we are better off having no policy than a NEG in its current form.

In consultation with my colleague, ACT climate minister Shane Rattenbury, the Greens will be pushing that the COAG energy council should not sign up to this compromised energy policy until after the federal legislation has run like Indiana Jones through the Coalition party room and through the national parliament. That’s the only way that COAG can be sure they are not signing a blank cheque.

Any agreement by COAG before that will be handing over all their power to the Coalition partyroom to determine targets, reviews, offsets and what subsidies for coal generators will be bolted on to the agreement.

The great thing about having Greens like Shane in government is that we can get real outcomes. We can hold the line for long enough until the Labor states can come around to their senses and demand greater ambition.

We are pushing for important improvements, especially to the woefully inadequate emissions reduction target, for the ability for state targets to be additional, and for a proper mechanism to ensure that poor targets don’t get locked in and are unable to be improved for a decade.

We will  be watching closely to see if the emissions profile is backloaded to make pollution reduction harder and dumping the responsibility on future governments.

John Grimes and the Smart Energy Council have put the call out to 400 renewable energy companies to help campaign for the Queensland and Victorian governments to form a bloc with the ACT. I thank them for their work and the determination and the persistence of the environment movement.

I think we can see it is starting to pay off with the Labor states hardening their resolve, but time will tell.

Greater aspirations

A key task of the Greens will be to turn our minds to science based targets. The stronger our national reduction targets are, the stronger your industry will be and the lower energy prices will be.

Even the ESB stated that ‘higher targets do not impact on reliability’. Combine that with the fact that stronger targets mean lower prices for longer, and it’s clear that we must lift our ambition well beyond business as usual.

The AEMO Integrated System Plan indicated the neutral forecast scenario was 46 percent renewable energy by 2030. The market operator has essentially said this is our new minimum benchmark. We would have to try really hard to screw that up – like locking in the NEG.

Of course, what that also means is that a target of 50 percent is a weak target.

The role of the Greens in the Senate is to shift the national debate – which we’ve done successfully around the bank levy and banking royal commission, changes to negative gearing and multinational tax avoidance. We now need to ensure that we do the only environmentally and economically responsible thing and increase our climate targets. The fact is, a 26 percent emissions reduction target in the electricity sector will sound the death knell for our Paris climate obligations. There is simply no chance that agriculture and transport will be able to match it. The power sector needs to do much more.

I will be frank about this. If we’re not going to have a Greens energy minister, we want to see Mark Butler as our next energy minister. After the recent by-elections I think that’s increasingly likely. But he should also know that we will use our role in the Parliament to improve a Labor government’s pollution targets well beyond a 'business as usual' 50 percent to turbo-charge the transition of our energy system.

A conflict of interest

The Greens are the only party that don’t take donations from the fossil fuel industry and we are the only party that have for many years been a consistent and solid voice in support of rapidly transforming our energy system.

Both parties take huge corporate donations from the coal, oil and gas industry and I fear that if Labor gets into government, their corporate donors will come knocking. How else could you explain Labor working with Turnbull to cut half a billion dollars from ARENA straight after the last election?

Just yesterday BHP urged Labor to support the NEG. I wonder why a coal company would want that? The last time BHP leaned on Labor they went to water on the mining tax. That’s why we need the Greens in the Senate to hold them to account.

Let me finish by saying that my call to the industry is: don’t just settle for what you’re offered. The only certainty in what’s being offered right now is the certainty of failure.

Fight for a future where your industry thrives. Defy the legacy of low expectations. The public is with us. They know renewables are the future and that they drive down prices. They know that stopping a rapidly changing climate means that we have to deploy clever new technologies and leave the polluting industries of the past behind.

And most of all, they know that it will take some courage to get there.