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Next steps in tackling energy challenge

The waiting game is over, with the Government announcing it will pursue the Energy Security Board's 'National Energy Guarantee' rather than the Finkel Review's 'Clean Energy Target'. But will it make a difference to emissions or power prices?

The Government announced yesterday that it will accept the recommendation of the Energy Security Board (ESB) to implement a National Energy Guarantee to deliver more affordable and reliable electricity while meeting our international commitments to reduce greenhouse gas emissions.

In its advice to the Government, the ESB claimed the Guarantee would give provide the certainty industry has been calling for - to enable new investment in generation capacity.

The ESB has modelled likely impacts on household power bills, projecting the average household will pay $110-$115 less per year over the 2020-2030 period.

The Guarantee is made up of two parts that will require energy retailers across the National Electricity Market to deliver reliable and lower emissions generation each year:

  1. A reliability guarantee will be set to deliver the right level of dispatchable energy (from ready-to-use sources such as coal, gas, pumped hydro and batteries) needed in each state. It will be set by the Australian Energy Market Commission (AEMC) and Australian Energy Market Operator (AEMO).
  2. An emissions guarantee will be set to contribute to Australia’s international commitments. The level of the guarantee will be determined by the Commonwealth and enforced by the Australian Energy Regulator (AER).

In a statement yesterday, the National Farmers’ Federation (NFF) said it will reserve judgement on the merits of the Government’s energy policy until details are released to explain how it will meet the energy needs of the farm sector.

We will work through the settings to understand what the proposed rules could mean for the agriculture sector and rural and regional Australia, more broadly.
Fiona Simson, President, NFF

The peak representative body for Australian agriculture has been direct in its call for the Government to find durable policy solutions to fix the broken National Electricity Market (NEM) and to ensure an electricity supply that is affordable, reliable and has a clear pathway to lower emissions.

“Farmers across the country – dairy farmers, fruit and vegetables producers, irrigators – are hurting from spiralling electricity prices and unreliable power supplies," NFF President Fiona Simson said.

"The businesses that value-add to our products once they leave the farm gate – packing sheds, food manufacturers, abattoirs, dairy factories, cotton gins and rice mills, also all need affordable energy sources."

Ms Simson said the NFF would not be 'hasty' in casting judgement based on a press release and a few newspaper reports. 

"Rather, we will work through the settings to understand what the proposed rules could mean for the agriculture sector and rural and regional Australia, more broadly.

"The NEM is complex. The NFF will take its time to consult with our members who include State representative bodies and commodity groups."

The NFF welcomed the passing of legislation in Federal Parliament yesterday to abolish the Limited Merits Review, though said more still needed to be done to address industry concerns vindicated in yesterday’s Preliminary Report on Retail Pricing released by the Australian Competition and Consumer Commission’s (ACCC).

“The ACCC’s report highlighted the market dominance of a few big players, a lack of retail competition and past over-investments to 'gold plate' network assets as key to driving electricity prices higher.

“As it stands, we've not seen any significant movement to address these issues and we must be confident that any new policy would not compound these problems.”

...we acknowledge the Government’s work in tackling the energy challenge, and we look forward to a responsible and detailed discussion to ensure we get the policy settings right.
Fiona Simson, President, NFF

Ms Simson said the farm sector was Australia’s fastest growing industry and the largest contributor to gross domestic product growth. In 2016-2017, agriculture was worth $60 billion to our nation’s economy.

“But our industry simply cannot withstand the continuation of the status quo when it comes to energy."

Ms Simson said while there was much complexity to work through, the policy concept put forward today by the Government had the potential to deliver the technology neutral, market-based mechanism the NFF had been calling for.

"To this end we acknowledge the Government’s work in tackling the energy challenge, and we look forward to a responsible and detailed discussion to ensure we get the policy settings right."

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