Update on the National Energy Guarantee (NEG)

The National Energy Guarantee (NEG) consultation paper was released on 15th February by the Energy Security Board (ESB)

The consultation paper and the ESB is committed to an open and transparent approach to the development of the Guarantee model.

The ESB provided a draft paper which went to all energy ministers at the April COAG meeting for consideration.

Key issues under consideration are

Stakeholder feedback on the best way for retailers to contact with, or directly invent in, generation, storage or demand response so;

  1. There is a minimum amount of energy available to meet consumers’ needs and keep the system reliable.
  2. The average emission levels of electricity they sell to consumers helps to meet emissions reduction commitments set by the Australian Government.
  • The Guarantee is designed to encourage new investment in clean and low emission technologies without compromising reliability.
  • Integrating energy and climate change policy through establishing clear emissions targets
  • The Guarantee is expected to increase contracting. More liquidity in the market is expected to reduce wholesale electricity prices that should result in lower retail prices to consumers.
  • The paper has considered a range of factors including consumer choices, rapidly evolving technology and environmental policies that are transforming the Australian Energy Market.

Reliability requirement key issues include

  • Forecasting any reliability gaps, triggering investment to meet any identified reliability gaps if the market is not responding.
  • AEMO’s ability to step into the market as a procurer of last resort if the reliability gap is not met.
  • Retailers’ compliance with meeting their requirements and penalties for those retailers that fail to meet these requirements.

Emissions requirements

The paper raises issues for the Guarantee’s emission requirements including;

  • How each retailer’s emissions should be calculated
  • Impacts of design options on the contract market.
  • The most efficient way for retailers to comply with their emissions requirement.
  • Development of a potential compliance registry
  • The interaction of the Guarantee and voluntary programs such as Greenpower
  • Enforcement tools including the use of civil proceedings.

Commonwealth Government Responsibilities

The ESB (Energy Security Board) is not seeking feedback on these three issues.

The Guarantee will require the Federal Government to determine;

  • Emission reduction targets for the NEM
  • Treatment of emissions-intensive trade-exposed (EITE) activities.
  • Eligibility of offsets and any limits on the use of eligible offsets.

The Government is seeking feedback on the following issues;

  • Setting the emissions targets under the Guarantee and its form
  • Whether electricity emissions targets should be adjusted and the process for doing so
  • Proposed approach for setting the electricity emissions targets under the Guarantee and interaction with state renewable energy schemes
  • Proposed timing for updating the electricity emissions targets, including a 5-year notice period.
  • Exemption of any EITE activities (emissions-intensive, trade-exposed)
  • Use of external offsets

The NEG is proposed to start in 2019 with the emissions requirement to start in 2020 to replace the current RET (renewable energy target).

The government have said;

“This it is not an emissions trading scheme as there are no permits or certificates. It is not a carbon tax as no revenue is collected.”

Oliver Yates, a renewable energy investor and former chief executive of the Clean Energy Finance Corporation said

“it makes no sense to put large retailers at the centre of a market they already control”.

The NEG hasn’t yet been accepted by all the states and territories at the Council of Australian Governments. (COAG). They are set to meet again in August,