Energy Security Board paints grim portrait of NEM

The Energy Security Board has called on government to accelerate the National Energy Guarantee (NEG) in order to fix the National Electricity Market (NEM), saying it was “not in the best of health”.

In its first report on the NEM, the recently created Energy Security Board said policy uncertainty of the past 10 years had resulted in insufficient electricity sector emissions reductions and increased costs in the industry.

“This has led to less than optimal outcomes,” the report said.

“A workable policy mechanism is an urgent matter for both delivering on emissions reduction targets and for wider industry concerns relating to affordability and reliability. The health of emissions reduction policy mechanisms in the NEM must at present be rated as critical.”

The report drew a grim picture of the NEM’s health, saying, “The immediate symptoms are a power system where reliability risks are increasing, electricity bills are not affordable, and future carbon emissions policy is uncertain.”

It said the NEG, which will be tabled at the Council of Australian Governments energy council meeting in April, could help give the energy market a clean bill of health.

“If this policy is adopted during 2018 it will integrate an emissions reduction mechanism with the NEM and provide incentives for investment to underpin reliability,” the report said.

“It should also improve liquidity in the wholesale contract market which will place downward pressure on prices.”