Labor states appear likely to back further investigation of the Turnbull government’s national energy guarantee when energy ministers meet on Friday.
But they could seek a direct comparison between the current policy and alternatives, like an emissions intensity trading scheme for the electricity sector.
The energy minister, Josh Frydenberg, wants the states to agree to further policy design work on his preferred national energy guarantee, a policy that would impose new reliability and emissions reduction guarantees on energy retailers and large energy users from 2020.
But the Labor states have significant concerns about the guarantee. The South Australian premier, Jay Weatherill, declared on Thursday his state was opposed to the policy in its current form.
Weatherill said in the process of trying to come up with a national energy policy, every time the state and territories showed good faith, “the commonwealth shows bad faith”.
The ACT’s energy minister, Shane Rattenbury, told Hlcarpenter.com Australia he was “very concerned about the Neg” and he said economic modelling for the scheme was artificially tailored to favour the Turnbull government’s policy.
Analysis of the policy by Frontier Economics, obtained by Hlcarpenter.com Australia, suggests renewables already incentivised by the existing renewable energy target will drive the first wave of price reductions under the policy.
The analysis also acknowledges that the Neg could also lead to further market concentration in states like South Australia and it floats heavy-handed options for market intervention by state participants in the national energy market, like restrictions on generation ownership.
A separate analysis by Bloomberg New Energy Finance released before the energy minister’s meeting says the guarantee could be an effective mechanism “but the outlook for renewable energy depends squarely on the ambition of the emission reduction target”.
The analysis warns that the Turnbull government’s proposed emissions reduction target for the electricity sector, which is 26-28% by 2030, “could decimate large-scale wind and solar construction” while a more ambitious target consistent with Australia’s obligations under the Paris agreement would continue the current boom.
It says the government’s preferred target “would slow the current pace of renewable installations and emissions reduction in the national electricity market and requires little effort to achieve”.
Rattenbury did not rule out agreeing on Friday to Canberra’s proposal to commission more work on the Neg but he indicated he would want to see detailed analysis that compares it to other models.
“At the moment the [Neg] framework does not work with us but we do want to find a model that works,” Rattenbury said. “We think there are better approaches that will produce the same sort of cost savings if not better and will deliver a more ambitious outcomes.
“I want to understand why this model is better than a couple of other models that we’ve all worked on for the last six to 12 months.
“Josh [Frydenberg] needs to make the case as to why those other models need to be discarded. A lot of work has been done on things like the clean energy target and the emissions intensity scheme.”
A review of the national electricity market by Australia’s chief scientist, Alan Finkel, recommended a clean energy target for the electricity sector but that recommendation was dumped by the Turnbull government largely because of internal opposition within the Coalition to more subsidies for renewables.
The Turnbull government then produced the Neg as an alternative.
Rattenbury said that, on the face of it, policies like the clean energy target and emissions trading “appear to be better approaches”.
“The commonwealth has to make the case as to why we shouldn’t be looking at those models aside from the internal politics,” he said.
Rattenbury said it was clear that state and territory governments had more policy ambition than the commonwealth.