The Turnbull government has announced its new energy policy following months of internal deliberations.
The government hopes the new plan will increase reliability while also reducing Australia's emissions, but Labor and several key stakeholders are yet to be convinced. Here's what four market experts think of the plan.
Matt Rennie, Ernst and Young:
This is a welcome change for a few reasons. Firstly, it marks a well-needed shift away from reviews and interventions, and signals a reliance on the market to derive the future generation mix. Secondly, it hits the security limb of the energy trilemma directly. These two factors combined will provide certainty to the market to lock in strategies around the provision of new capacity. Like any policy, there will be winners and losers. We expect mass market retailers, who bear the brunt of the obligations and guarantees, to be negatively impacted by the changes, as well as the renewables development industry. Gas power will play a much more significant role in providing system security under this policy, putting continued pressure on the availability of well-priced domestic natural gas supply. While not yet announced, we expect to see a growing focus by regulators on generation bidding behaviour as well as network prices over the next 12 months, as state and federal governments drill further into affordability as a key cost of living issue for households.
Tony Wood, the Grattan Institute:
The Turnbull government's long-awaited national energy guarantee should be supported, not just within the Coalition but by Labor, the states, the energy industry and by electricity consumers. The guarantee links energy and climate change policies and works through the market by creating incentives for dispatchable supply and lower emissions. By design, it meets these two dimensions of the energy and climate dilemma. The Energy Security Board has also advised the government that it expects wholesale and retail prices to fall and for the latter to be lower than modelled for the Finkel review. Inevitably these numbers will be closely scrutinised. The ESB has given the Turnbull government the last piece in the complex jigsaw puzzle of a credible energy and climate change policy for Australia. The task for Turnbull and Frydenberg is to take this leadership opportunity and craft a compelling narrative to unite disparate views and interests.
Professor Ken Baldwin, ANU Energy Change Institute:
The national energy guarantee has thrown the electricity sector into more policy turmoil by putting in jeopardy a bipartisan approach to energy and climate policy. By removing the clean energy target it fails the technology neutrality test because it does not impose the true cost of greenhouse gas emissions on fossil fuel generation. Further, it is not clear whether the NEG can do the heavy lifting for the rest of the economy that will be needed to meet our Paris targets. Inevitably carbon pricing will be adopted around the world, and only when a future Australian government aligns with this will the energy industry find the policy certainty needed to unlock the logjam in renewable energy investment.
Mark Coughlin, PwC Australia:
Australia's energy market is complex and the policy challenges facing Australia are broad and deep. Power reliability and cost of supply has been damaging the nation's economic performance and consumer confidence. We need an energy policy that will improve reliability, reduce costs and reduce emissions. Tuesday's announcements, plus the 49 remaining Finkel recommendations, should be supported by industry and all sides of politics. The proposed changes by the government place the onus on the energy market to innovate without subsidies to guarantee reliability and reduce costs and emissions. The plan does not pick winners, which is welcome. We should all get behind this plan and make it a reality - it looks to provide the long-awaited certainty, reliability and affordability medicine we have been looking for to treat the ills of our energy market.