Turnbull’s national energy guarantee a step closer after Jay Weatherill’s exit

The Turnbull government is one step closer to being able to implement its proposed national energy guarantee, courtesy of Jay Weatherill’s departure as the South Australian premier after Saturday’s state election.

Weatherill led the resistance at the state level to the Turnbull proposal, which will impose new reliability and emissions reduction guarantees on energy retailers and large energy users from 2020.

The former Labor premier, who pursued an ambitious renewable energy program in South Australia during his tenure in the top job, was an implacable one-man roadblock to the national energy guarantee on the basis that the scheme was not sufficiently friendly to renewables.

The election of the new Liberal government in South Australia will allow the Turnbull government to press reset on the proposal which is now being worked through the energy ministers council – a group of federal, state and territory energy ministers – and Labor’s departure in SA improves the chances of reaching consensus.

Canberra set up the program of work on the national energy guarantee through the energy ministers council specifically with the South Australian election timing in mind.

Last November ministers agreed that the Energy Security Board would undertake work on the national energy guarantee only as directed by the energy ministers’ council within the Council of Australian Governments, with the detail of the scheme to be considered next April – on the other side of the South Australian poll.

The Turnbull government can’t implement its proposal without the backing of state governments because of the legislative underpinnings of the national energy market. States will be required to legislate the scheme.

If Weatherill had remained in office, there would have been a significant question about whether the proposal could have proceeded.

The Turnbull government produced the national energy guarantee proposal after ditching a recommendation by Australia’s chief scientist, Alan Finkel, to adopt a clean energy target.

Before that, the energy minister, Josh Frydenberg, briefly countenanced an emissions intensity trading scheme for the electricity sector, before dumping it within 24 hours after a noisy internal backlash within the Coalition.

The government hails the national energy guarantee as the mechanism to end a decade of climate change wars in Australian politics and forge a durable political consensus to ensure the national electricity market is reliable and Australia conforms with the emissions reduction targets set in the Paris agreement.

While the concept has support from a range of business groups, Labor federally remains sceptical about the merits of the scheme, and the environment movement and many market analysts say the emissions reduction target for electricity embedded in the scheme is nowhere near ambitious enough to see Australia meet its international climate obligations.

Bureaucrats who have designed the national energy guarantee for the federal government want to push through to implementation over the next couple of years, when power prices are forecast to fall because of the large proportion of renewable electricity assets due to come on stream.

An analysis released last December predicts wholesale electricity costs will fall in 2018-19 and 2019-20, with a reduction in the order of 12% owing to approximately 5,300 megawatts of new committed and expected generation entering the national electricity market – the majority of which is renewable generation (4,900 MW).

Energy regulators want governments to finalise the scheme and introduce it in the window where electricity prices are coming down – over the next two years – to help minimise any public resistance to the change.

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