A National Energy Guarantee (NEG) by 2019? The 8 steps that need to happen

The Renewable Energy Target runs out in 2020 and the Federal Government aims to replace in with the National Energy Guarantee (NEG), saying that it is the only way to provide cheaper electricity with security of supply.

Given that the RET ends in 2020, the Government will aim to push legislation through within two years, buoyed by the fact that energy prices are expected to drop by about 13 percent by that date.

Nothing is a foregone conclusion and there are few things that need to happen before we finally get a bi-partisan solution to Australia’s energy crisis.

Former South Australia’s Labor Premier Jay Weatherill was a major stumbling block to putting the NEG into practice. He opposed the NEG on the grounds that it did not give enough importance to renewable sources of energy. South Australia was supported by the ACT state government.

The South Australia obstacle has been removed, with voters opting for a Liberal Government led by Steven Marshall, who has signalled support for the NEG, providing that modelling by the Energy Security Board proves to be favourable. If South Australia backs the plan it is unlikely that the ACT will continue to resist it.

New South Wales, Queensland, Tasmania and Victoria are all in favour of introducing the NEG. Here’s a rundown of the things that need to happen for the NEG to come into effect, and more importantly… when.

The snapshot:

1 – Modelling of the NEG by the Energy Security Board

The incoming Marshall government in South Australia said it will only back the NEG if it provides cheaper energy prices and more security of supply. The ESB must complete its modelling in good time to present it to SA and other state governments before the next Council of Australian Governments Energy Council meeting in April.

Timeframe

The COAG meeting has been scheduled for April, but no date has yet been set, presumably because the ESB is working in overdrive to get the modelling done. Realistically, this could happen in the next 2-3 weeks.

2 – SA must approve the NEG

South Australia will approve the plan provided that it meets the above-mentioned criteria. Premier Steven Marshall has yet to announce his cabinet, which he is expected to do on 22 March and former Energy Shadow Minister Dan Van Holst Pellekaan is expected to step up to Minister.

The cabinet will meet next week, after which it will take a stance on the NEG Modelling by the ESB.

It is also understood that South Australia wants another interconnector link to New South Wales to supplement the Victoria connection and ensure that there is more baseload power available.

Federal Minister Josh Frydenberg has already said that a framework was already being drawn up to put cash on the table to help finance the project, while the NSW government said it welcomed the proposal.

It is understood that a feasibility study will be completed by June 2018.

Timeframe

It all depends on how quick the ESB finishes its modelling and presents it to state governments.

Given that it might take 2-3 weeks for it to be complete, approval from SA might come as little as a week later. Estimated time 4 weeks.

3 – ACT must drop its resistance to the NEG

The ACT, which is the smallest state in terms of population and energy consumption is still officially against the introduction of the NEG. The ACT, however, will not likely continue with its resistance if South Australia gives its backing.

Timeframe

On a political level, the ACT Government will make a decision as soon as the South Australian Government announces its intentions. Whether or not it will go public before the COAG meeting remains to be seen.

4 – COAG approval

The COAG Energy Council meeting will bring together the energy ministers from all National Energy Market member states to the table to give a final stamp of approval for the NEG. This is likely to be a formality once the meeting is convened

Timeframe

The COAG meeting will be held in April, but no date has yet been set for the summit. Leading Edge Energy enquired with the secretariat about the date, but we were told by a spokesperson that the information could not be divulged. The meeting could happen anywhere between 1 and 30 April.

5 – Fine-tuning by the Energy Security Board

A media release on Federal Energy Minister Josh Frydenberg’s website states that after the April COAG meeting, “The Energy Security Board will undertake further consultation and design work on the Guarantee following the COAG Energy Council meeting in April 2018, with the final detailed design to be presented to the COAG Energy Council later this year.”

If the state energy ministers agree to the proposal in principle, then a follow-up meeting will be held to approve the finer workings of the NEG.

Timeframe

The COAG Energy Council meets a minimum of twice a year, however last year it convened a total of six times. The meetings were held within two months of each other. Given that much of last year’s meetings were about the NEG and the Federal Government’s urgency to get it approved, this could happen as quickly as June, which would also tie in with the NSW-SA interconnector’s feasibility study.

6 – Approval in Parliament

Getting laws and bills approved by Parliament and the Senate is a lengthy affair.

Once the NEG proposal is signed off by the COAG Energy Ministers at the follow-up meeting, it will need to be debated in parliament before a vote is taken.

The Labor Party, in 2016, indicated that it would sign up to the NEG in the interests of national energy security.

Timeframe

Anyone’s guess, but not likely to be less than six months from the time that the COAG gives its official approval. End of 2018, the start of 2019 at best.

7 – Ratification by state parliaments

Once the national assembly gives its approval to the NEG legislation, it will go to the state parliaments for ratification, under the rules of the National Energy Market.

Timeframe

Assuming that all states have agreed to the NEG by now, it is likely to be a rubber-stamping exercise which should not take too long, perhaps just weeks.

8 -Formal adoption of the NEG

The NEG’s adoption is subject to the rules of the National Energy Market. A lot will have been done by AEMO, AEMC, AER and other regulatory bodies behind the scenes to get things ready for the NEG. Once it is approved, Australia can expect the policy to kick in.

Timeframe

The Renewable Energy Target runs out in 2020, and Malcolm Turnbull’s term runs out in July 2019, the Liberal Government would hope to introduce the NEG before then and claim it as a political victory in the run-up to the polls. Campaigning is likely to start in May 2019, and it would be a big ask, but not impossible, for the NEG to be in place by then. The most likely time frame for the activation of the NEG would be late 2019 to early 2020.