ACCC supports the NEG, with strings attached
Poppy Johnston | 12 July 2018
The release of the competition regulator’s report on consumer energy prices may not quite be the big win coal lobbyists were hoping for.
Reactions to the Australian Competition and Consumer Commission (ACCC) report this week that backs the government’s National Energy Guarantee is not as promising for the coal industry as it might have wanted.
The prime minister Malcolm Turnbull on Wednesday ruled out subsiding a new coal fired power station while analysts said there was no appetite for such investment with or without government backing. And, Labor’s shadow minister for climate change and energy Mark Butler told ABC’s Radio National on Thursday morning said the expectation among voters was for a clean energy future, not coal.
“The real thrust of this report is that there is too much market power held by just a few companies and what we need is more competition in the system to provide better outcomes to consumers,” Mr Butler told ABC’s Radio National.
“Unfortunately what has happened here is again the coal ideologues in the Coalition party room have effectively hijacked what is quite a serious, important recommendation and pretend that this is going to deliver new coal into the system.”
The ACCC report essentially backed the NEG but it also called for safeguards to stop heavy-weight incumbents increasing their market dominance.
In the report on consumer energy prices released on Wednesday, the ACCC also recommends the fast-tracked phase out the federal small scale renewable energy scheme because of its reported impact on power prices for non-solar customers. The SRES was due to be phased out by 2030 but the ACCC said wanted the phase out to be by 2021 in order to save non-solar consumers $20 to $90 per year.
The report also suggests funding for premium solar feed-in-tariff schemes should by provided by state governments, which will stop further additional costs being absorbed by non-solar households.
Mr Butler told Radio National that the community recognised the value in subsidising a new technology that is cleaner, even if not initially cheaper, until “it can stand on its own two feet”.
He cited ACCC chief Rodd Sims’ comments to media on Wednesday that through the 16 months of the inquiry the discussion had centred on renewable energy and gas projects, but that “nobody has mentioned coal to us”.
“There is just no appetite at all within the business community to invest in coal-fired generation with or without support from the commonwealth, so the sooner that is put aside and we have a serious debate about this report rather than one that suits the coal ideologues in the Coalition party room, the better,” he said.
The technology is now mature and cheaper to deploy than new coal, as has been demonstrated in a number of other countries already, Mr Butler said.
“When I go out and talk to people in the community, I think they recognise that the future of electricity is renewable – it’s not only going to be a future that provides much less pollution but also will provide lower cost.”
Reasons prices are high is not just because of green schemes – blame deceptive retailers and market dominant companies as well
Green schemes such as the SRES are not the only reason consumers are experiencing inflated energy prices, according to the ACCC, with the regulator also levelling blame at deceptive retailer conduct, market-dominant companies, and weaknesses in regulatory frameworks.
The ACCC pointed to long-term indecision on climate change policy and its subsequent impact on new investment as part of the problem.
The report recommends the implementation of the NEG as a pricing-friendly policy mechanism that will drive investment that both encourages reduced carbon emissions and ensures demands for energy are met.
“To the extent that this policy can encourage investment in capacity from a diverse range of sources, diluting market concentration and promoting competition to supply retailers, the policy should assist in delivering electricity affordability”, the report said.
However, the ACCC recommended the inclusion of safeguards on the NEG so that large incumbents don’t gain more market control.
“It is crucial that the NEG includes safeguards to ensure that the new obligations on retailers do not deliver large incumbents advantages in complying with the scheme, such as those afforded to them through ownership of significant generation portfolios.”
The Energy Security Board has recognised this risk and has sought to address it through mechanisms that will be built into the design of the NEG.
Support for the NEG a concern
In his response to the report, Smart Energy Council chief executive John Grimes agrees that the energy market is broken, but is concerned by the ACCC’s somewhat hesitant support for the NEG.
“The ACCC has delivered faint praise for the National Energy Guarantee. It knows the National Energy Guarantee is flawed and needs a lot more work before it can be signed off by governments.
“The Smart Energy Council agrees the energy market is broken. Families and businesses suffering from massive power bills need to be at the centre of the energy market, not the big power companies. The National Energy Guarantee is flawed and doesn’t fix the problem”, Mr Grimes said.
Despite the ACCC’s stance on small-scale renewable subsidies schemes, Grimes recognised that “the ACCC report does highlight the important of renewable energy backed by battery storage, the future of Australia’s energy system.”
Rodd Sims estimates the report’s recommendations, if enacted, would save households between $300 and $750, depending on where they live and their current plan. The changes could save businesses as much as $2250.
“The National Electricity Market is largely broken and needs to be reset. Previous approaches to policy, regulatory design and competition in this sector over at least the past decade have resulted in a serious electricity affordability problem for consumers and businesses,” he said.
-With Tina Perinotto