Environment

‘Big issue’: Turnbull government’s energy plan may curb state ambition

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The meeting aims to secure bipartisan support for the NEG. Its aims are to help reduce electricity prices and increase reliability of the power grid while also achieving Australia's commitments to cut overall greenhouse emissions 26 per cent from 2005 levels by 2030 as part of the global Paris climate agreement.

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The Victorian government is understood to be disappointed by the lack of modelling included in the federal paper, which was far less detailed than a separate "High Level Design Document" circulated by the Energy Security Board at the end of last week.

The two papers are expected to be all that the ministers will have to work on ahead of Friday's meeting.

The federal paper will likely stir concern about whether regions – such as Victoria, Queensland and the ACT – will get any benefit from setting higher emissions-reduction goals.

"Where states and territories pursued their own renewable energy targets, such as to achieve investment or policy objectives, this would not change the target under the [National Energy] Guarantee," the paper states.

Dylan McConnell, a research fellow at Melbourne University's Australian-German Climate and Energy College, said: "It's going to be a big issue."

Mr McConnell said the state opposition in Victoria could potentially attack the state Labor government for pushing up power prices by doing more to cut emissions. At the same time neighbours such as NSW could take advantage of the plan by doing less and not being penalised.

"[This] is the central concern for the ACT and potentially Victoria as well," said Frank Jotzo, an energy expert at the Australian National University's Crawford School of Public Policy.

State governments including Queensland, which has a more aggressive reduction target than the Federal government, would "absolutely need to avoid their own state efforts getting washed out" by a set national target, Professor Jotzo added.

A spokesman for Energy Minister Josh Frydenberg declined to comment on state targets but noted that the minister addressed the issue last week at Press Club speech in Canberra. Mr Frydenberg has indicated a willingness to adjust guidlines that created problems for individual states.

The spokesman also highlighting a call by Manufacturing Australia – a group of 10 large energy users – for states and territorities to back the National Energy Guarantee.

"I urge our state governments not to 'go it alone' and to work together around a single workable energy platform, seeking improvements where necessary," James Fazzino, chairman of the group said in a statement.

"It's very significant that Australia's largest manufacturers, representing hundreds of thousands of blue-collar workers across the country, have come out so strongly for the [NEG]," Mr Frydenberg said.

The federal paper laid out a range of positions without signalling its final position on many of them.

For example, "submissions from stakeholders suggest the goverment's proposed approach of five years [for a review period] strikes the right balance between certainty and flexibility", the paper notes.

Mr Jotzo said it made more sense to have reviews more regularly, such as every three years.

Technology prices, particularly for renewable energy and storage, are changing fast and mostly becoming cheaper, he said. Coal-fired power stations may also drop out sooner than expected because the costs of maintaining aging plants were likely to increase.

The federal government also appears to remains uncertain how it will treat so-called energy-intensive trade-exposed energy users. "The government will carefully consider the issues raised by stakeholders in the design process," the paper said.

Such users account for about a fifth of demand and excluding them from the costs of the NEG would sheet home the bill to other energy users, Mr McConnell said.

The government is also "continuing to consider" whether to allow retailers the ability to secure "external offsets as a flexible compliance option" to meet their NEG guarantee, the paper said.

While the Energy Security Board has stressed there would be no trading system accompanying the NEG, the need for retailers with high emissions to buy low-emission rights implied the need for sellers, Professor Jotzo said.

"There's nothing that precludes [those low-emissions rights] being traded in an exchange," he said.

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Peter Hannam

Peter Hannam is Environment Editor at The Sydney Morning Herald. He covers broad environmental issues ranging from climate change to renewable energy for Fairfax Media.

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