In October 2017, the federal government proposed a new energy policy with the National Energy Guarantee (NEG), under recommendation from the Energy Security Board.

The NEG is the government’s new plan after scrapping the proposal of the Clean Energy Target, which was recommended by chief scientist Alan Finkel. The NEG aims to reduce greenhouse emissions by 26% (relative to 2005 levels) by 2030, and ensure that households and businesses have access to affordable and reliable power, as the energy market continues to change.

This scheme will see significant savings on electricity costs, so it seems to be a good move for both Australia’s international emissions commitments, and for Australian businesses.

Let’s break it down a little further…

NEG in a nutshell

The aim of the NEG is for retailers to meet two targets: a reliability guarantee, and an emissions guarantee. It wants to ensure that supply meets demand, while keeping energy as clean and renewable as possible.

To keep up with the reliability guarantee, retailers would be required to generate power from dispatchable sources – that is, energy sources that are instantly available and guaranteed. Solar and wind are not dispatchable sources because there’s no guarantee that the sun will shine or the wind will blow.

Examples of dispatchable combinations include gas/hydro and solar/battery/coal. If a retailer is using wind or solar power, it will need to contract with owners of dispatchable power, invest in new dispatchable generation or demand response will need to be classified as dispatchable.

Under the NEG, if energy retailers do not meet their obligations, they will face penalties. The government has also flagged that it may deregister companies that do not comply.

What would its introduction mean?

The NEG would improve reliability and emissions, and also help Australia meet the Paris agreement.

It may also see the introduction, or increased usage, of new technologies like batteries and demand response programs, in order to meet short-term energy needs.

An important consideration is that the NEG needs to be designed so that it doesn’t unfairly advantage or disadvantage retailers – particularly small or new players who don’t own or have access to dispatchable power as yet.

What’s next?

The NEG isn’t locked in yet, and the policy details are still in the works. Flow Power will be participating in consultation discussions to ensure that the policy advantages consumers and retailers, rather than making it difficult for smaller retailers to compete.

If the NEG does go ahead, it will affect a change in the National Electricity Rules. It can be passed without legislation, but it does need to go through state governments.

We’re working to ensure that if this new policy passes, you and your business will still be top of mind.