Submission to the National Energy Guarantee

Download this submission:
Submission to the Energy Security Board regarding the National Energy Guarantee (PDF, 83 KB, 8 March 2018).

The Science Party NSW's submission in response to the National Energy Guarantee dentified some weaknesses of the plan and proposed some alternative approaches.

While the language of our submission is quite technical, the essence of our three recommendations is as follows:

Recommendation 1:
Commit to bidding at extremely high prices or only having generation available during Lack of Reserve conditions. This preserves the financial incentive for private investors to build new generation. An example would be the South Australian Government's recent purchase of open cycle turbines.

Recommendation 2:
Act as a long-term support for the cap market. E.g. purchase a long-term, low-cost cap and sell caps back to the market on a short term basis. Additional government-owned capacity could be owned by Snowy Hydro as this function fits their role as a peak capacity provider.

Recommendation 3:
The Energy Security Board (ESB) could still keep the emissions threshold mechanism in an emitter-focussed policy. This would help focus penalties on the worst emitters rather than moderate emitters (such as combined cycle gas generators). Accumulated payments from emitters need not subsidise low emissions generators. They could be used to compensate consumers or invest in infrastructure focussed on reliability and security, such as transmission upgrades or Snowy Hydro 2.0.

Conclusions

The ESB's suggested policy changes threaten to complicate the market, stifle investment, increase costs, reduce competition, and lock in high emissions.

The ESB's highest priorities must be:

  • Structuring policy that supports a long-term, meaningful emissions reduction trajectory.
  • Inclusive frameworks for customers that fairly value participation, and rewards behaviour
    that benefits the whole of society.

The ESB should be cautious of complex or major market changes that could postpone the
development of new generation.

 

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