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Power Struggle

  • Power Struggle

Subsidies for renewables to be scrapped

The government is set to unveil its long-awaited energy plan that would scrap subsidies for renewables and impose obligations on power companies to source a certain proportion of “reliable” supply.

While the plan emphasises reliability and reducing power prices, the government is also confident it would allow Australia to meet its commitments under the Paris climate change agreement.

Cabinet considered the scheme on Monday night. It goes to the Coalition party room on Tuesday morning, before being announced later in the day.

It follows months of uncertainty and internal pressures within the Coalition over the future of energy policy, as the government battles to head off the risk of blackouts as well as to quell mounting voter anger at soaring bills.

In a report released on Monday the Australian Competition and Consumer Commission said residential electricity prices have increased by 63% on top of inflation in the last decade, with network costs being the major contributor.

As the government has flagged for a week, its plan rejects the Clean Energy Target (CET) recommended in June by chief scientist Alan Finkel, to which Malcolm Turnbull initially appeared favourably disposed.

Ironically, the alternative scheme has been worked up by the Energy Security Board, a new body that was established on a recommendation from the Finkel inquiry.

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Under the scheme, power companies would have twin obligations imposed on them by the government.

They would be required to get a certain amount of power from “reliable” sources – whether coal, gas, hydro, or batteries.

They would also have to source another amount that was consistent with lowering emissions in line with Australia’s international commitments. Australia has signed up to reducing greenhouse gas emissions to 26–28% below 2005 levels by 2030.

It would be up to the companies as to how they met the obligations put on them.

The plan assumes that prices would be driven down because the scheme would give the certainty that investors have been looking for, so supply would increase.

The Coalition party meeting will be given an estimate of the expected savings on power bills, which would be more than the $90 annual household saving estimated under the Finkel CET.

The scheme is expected to appeal to the right in the Coalition because there are no subsidies for renewables, making for a level playing field - coal is treated the same as wind and solar.

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The present renewable energy target would continue until its expiry in 2020, after which there would be no new certificates issued under it.

The Energy Security Board has on it an independent chair, Kerry Schott, and deputy chair, Clare Savage, as well as the heads of the Australian Energy Market Operator, the Australian Energy Regulator and the Australian Energy Market Commission.

The ABC reported that Drew Clarke, a former chief of staff to Malcolm Turnbull and former head of the communications department will chair the Australian Energy Market Operator. This would be an appointment by the Council of Australian Governments (COAG).

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