Australia’s energy focus should be on the prize, not the rules

It’s not worth getting too excited about the many technical deficiencies in the proposed National Energy Guarantee and the poverty of the vision that underlies it.

In the end it’s just a political thing to avoid having electricity or climate change targets as mainstream issues in the Federal election. Politically, both sides have had a win. Labor States will see that there weren’t any blackouts or high priced events this summer.

The Federal Government links high price or blackout events on Labor State environmental policies. We know this is wrong in fact, but it works politically.

On the other hand the NEG is progressing and if it is agreed to be implemented in September it will be seen as a wind for energy minister Josh Frydenberg and the Coalition, and will likely be in time to be a minor item for the next Federal election.

But the point is, it’s just a politics exercise. And even if wasn’t it still doesn’t pay to take your eye off the main issues.

The main issues are

1. If consumers, small and increasing bigger, continue to see behind the meter generation and or storage as cheaper than in front of the meter (utility scale) power, but still have the security of being connected to the grid, then behind the meter will keep growing at the expense of in front of the meter. If grid delivered volume is flat or declining it will be difficult to get unit costs and hence prices down.

2. Australia’s coal generators are getting old and in NSW particularly will have to be replace them over the next 10-15 years. If new supply is built in advance then reliability will be high but generators profits will suffer from oversupply for a while. If the new supply is built too late then there is a reliability/blackout risk and prices will for a while be sky high (see the Hazelwood/Portland smelter case study).

a) What will the LCOE be of the generation that replaces the coal fleet?

b) Will this make our electricity costs more or less competitive with our major trading partners? Lets say these are China, Japan and the USA

c) If most of the energy to replace the coal comes