The government is set to unveil its long-awaited energy plan that would scrap subsidies for renewables and impose obligations on power companies to source a certain proportion of “reliable” supply.
While the plan emphasises reliability and reducing power prices, the government is also confident it would allow Australia to meet its commitments under the Paris climate change agreement.
Cabinet considered the scheme on Monday night. It goes to the Coalition party room on Tuesday morning, before being announced later in the day.
It follows months of uncertainty and internal pressures within the Coalition over the future of energy policy, as the government battles to head off the risk of blackouts as well as to quell mounting voter anger at soaring bills.
In a report released on Monday the Australian Competition and Consumer Commission said residential electricity prices have increased by 63% on top of inflation in the last decade, with network costs being the major contributor.
As the government has flagged for a week, its plan rejects the Clean Energy Target (CET) recommended in June by chief scientist Alan Finkel, to which Malcolm Turnbull initially appeared favourably disposed.
Ironically, the alternative scheme has been worked up by the Energy Security Board, a new body that was established on a recommendation from the Finkel inquiry.
Under the scheme, power companies would have twin obligations imposed on them by the government.
They would be required to get a certain amount of power from “reliable” sources – whether coal, gas, hydro, or batteries.
They would also have to source another amount that was consistent with lowering emissions in line with Australia’s international commitments. Australia has signed up to reducing greenhouse gas emissions to 26–28% below 2005 levels by 2030.
It would be up to the companies as to how they met the obligations put on them.
The plan assumes that prices would be driven down because the scheme would give the certainty that investors have been looking for, so supply would increase.
The Coalition party meeting will be given an estimate of the expected savings on power bills, which would be more than the $90 annual household saving estimated under the Finkel CET.
The scheme is expected to appeal to the right in the Coalition because there are no subsidies for renewables, making for a level playing field - coal is treated the same as wind and solar.
The present renewable energy target would continue until its expiry in 2020, after which there would be no new certificates issued under it.
The Energy Security Board has on it an independent chair, Kerry Schott, and deputy chair, Clare Savage, as well as the heads of the Australian Energy Market Operator, the Australian Energy Regulator and the Australian Energy Market Commission.
The ABC reported that Drew Clarke, a former chief of staff to Malcolm Turnbull and former head of the communications department will chair the Australian Energy Market Operator. This would be an appointment by the Council of Australian Governments (COAG).
In question time, opposition leader Bill Shorten accused Turnbull of “caving in” to Tony Abbott by rejecting a clean energy target.
Turnbull said the government “will deliver a careful energy plan based on engineering and economics, designed to deliver the triple bottom line of affordability, reliability and meeting our international commitments. And that is in stark contrast to the ideology and the idiocy that have been inflicted on us for years by the Australian Labor party”.
Abbott, speaking on 2GB, said that “we’ve got a big policy problem” that needed to be addressed. This included “continued heavy subsidies for unreliable power”, lack of new coal-fired baseload power, bans on gas and a lack of incentives for farmers to go along with gas development, and bans on nuclear power.
The former prime minister said the problem over the last few years was that “we haven’t been running a system for affordability and reliability, we’ve been running a system to reduce emissions. It’s given us some of the most expensive power in the world and this is literally insane, given that we are the country with the largest readily available reserves of coal, gas and uranium”.
Monday’s Newspoll found that 63% thought taxpayer-funded subsidies for investment in renewables should be continued; only 23% thought they should be removed. But 58% said they would not be prepared to pay any more for electricity in order to implement a clean energy target to foster more renewable energy sources.
Authors: Michelle Grattan, Professorial Fellow, University of Canberra