The change you’re having when you’re not having a change.
If the over-riding goal of the Government’s proposed NEG is to provide a clear plan for the future of energy supply in this country, then our advice is to bring along a compass and a cut lunch. It could be a long journey.
What is the NEG?
The National Energy Guarantee (NEG) is a plan by the Turnbull Government to formulate a “national” energy policy to put Australia on the path to build its future energy network. The NEG arose from the Finkel Review in 2017 which aimed to address problems with the energy market in Australia. The NEG attempts to address the same issues of energy security (making sure there is enough energy), reliability (no blackouts) and affordability, while ensuring we can meet our global emissions reductions targets.
Unfortunately, the Energy Security Board (ESB) charged with the NEG’s development has to balance the strong calls for Australia to embrace a future of renewable energy with pressures to protect our aging infrastructure (coal fired plants, poles and wires) and fossil fuel industries.
The ESB recently called for submissions to its draft policy framework. In our response, Enova Community Energy set out key issues we believe still need to be addressed for the NEG to be effective.
Key concerns are that the NEG as drafted:
- Strengthens the position of large retailers and weakens competition, leaving consumers and the environment as the losers;
- Fails to acknowledge the importance of distributed energy resources (DER) – rooftop solar, storage, and demand management – one of the quickest, most cost-effective ways for Australia to transition to renewables; and, most importantly
- Fails to speed up replacing polluting coal power with clean energy.
Under the current proposal, direct costs for compliance will be little different for small or large retailers, increasing the challenges faced by small retailers in the current national energy system. Retailing involves a significant fixed cost base so large numbers of customers are required to minimise per customer costs. Small retailers already have a higher per customer cost. An additional administrative burden will be cumbersome, and for small players, unrealistic.
Significantly, under the proposals, the dual obligations for an emissions reduction requirement and a reliability requirement will reduce the ability of small retailers to source suitable contract products at competitive rates, which would necessarily impact pricing to customers.
By disadvantaging small retailers, the NEG undermines marketplace competition. This is not in the best interest of consumers. Enova demonstrated this when it led the way after the NSW Solar Bonus Scheme ended in December 2016, offering the most generous Feed-in Tariff (FIT) of all the retailers in a bid to encourage households to retain interest in solar. The large retailers, in a very short time, increased their FITs.
It is small retailers like Enova, who provide people more choice in a market dominated by three large retailers who also control generation. Further, Enova has a unique business model: our company constitution guarantees we will reinvest 50% of profits, after tax and re-investment, into community-based renewable energy projects and social initiatives, through our not-for-profit arm Enova Community.
Small retailers like ourselves actively seek innovative ways to generate and use local renewable energy to make it accessible and affordable for everyone. For example, Enova will soon launch a local solar garden to provide renters or people who can’t have solar on their homes the option to have solar. We are also working with North Coast Community Housing to put solar PV on social housing, to reduce energy bills for low income households.
Worse than a “ do-nothing” option
As it stands, the NEG will extend the lifespan of coal-fired power plants, at the expense of renewable energy generation. The days of coal-fired plants should be put behind us as Australia embraces a renewable energy future as many other countries are doing. Money spent keeping aging infrastructure alive could be invested instead in renewable energy technologies and infrastructure.
In Australia, with our climate, solar energy is an obvious choice. As proposed, emission requirements will be set on retailers’ net energy sourced from the wholesale market. This does not give retailers credit for rooftop solar exports, which are purchased from the retailer’s customer base. It fails to acknowledge the retailers’ role in encouraging solar PV and storage. It also fails to recognise the role and benefits of DER in the future energy system. This lacks foresight as we develop a future of self-sufficient regions based on renewable energy sources.
We can only work with others to attempt to achieve a NEG that recognises the need for Australia to keep pace with the rest of the world and focus on transition to renewables, leaving 20th centuries technologies where they belong, in the past.
Alison Crooke AO Enova Community Energy Ltd Chair