ESB publishes final detailed design of the NEG

The Energy Security Board (ESB) has published the Final Detailed Design of the National Energy Guarantee (NEG).

The COAG Energy Council is set to make a decision on the Federal Government’s proposed policy on August 10.

ESB chair Dr Kerry Schott AO said the design was the culmination of almost a year’s work and a collaborative effort by people and organisations from across the energy sector and the community.

“Stakeholders have been clear with the ESB that the status quo is simply not acceptable and have come together to help design a robust, flexible mechanism that can respond to the changes that are underway in the energy market,” Dr Schott said.

“The mechanism is designed to be technology and fuel neutral, to boost competition in wholesale and retail markets, and to deliver more affordable, reliable and clean power for Australian households and businesses.

“The NEG mechanism ensures the electricity sector contributes its share towards Australia’s Paris emissions reduction commitments and, importantly, can accommodate different levels of emissions ambition overtime.

“It also works in with state and territory targets and renewable energy schemes.

“Any delay, or worse, a failure to reach agreement, will simply prolong the current investment uncertainty and deny customers more affordable energy.”

The average household bill is expected to be $550 lower each year through the 2020s than it is now, and $150 of those savings will be because of the NEG, according to Dr Schott.

She said 15 years of climate policy uncertainty had impeded investment, affected the security and reliability of the power system, and increased prices for households and businesses.

“The NEG can give the energy sector the certainty it needs to plan, source and invest over the longer-term in dispatchable, low emissions energy generation and demand-side energy resources in a transforming market,” Dr Schott said.

“Once implemented, the NEG will produce a clear investment signal so the cleanest, cheapest and most reliable generation can get built in the right place at the right time.”

To deliver this transition, the NEG requires retailers to contract for generation or demand response to meet a minimum level of dispatchable ‘on demand’ electricity where there is an identified gap, Dr Schott said.

She said retailers must also keep their emissions below an agreed level.

“In concert, these two requirements will enable long-term policy confidence and stability that is critical to lowering investment risk in the NEM, and bringing down electricity prices,” Dr Schott said.

“Increased contracting in deeper and more liquid contract markets will also reduce the level and volatility of spot prices further improving affordability.”

If the COAG Energy Council agrees to the final design of the NEG mechanism at the August meeting, draft legislative amendments to the National Electricity Law will be released in the week following the meeting and will be finalised for introduction into the South Australian Parliament during 2018.

Rule changes will be presented to the COAG Energy Council at its April 2019 meeting.