Energy Security Board National Energy Guarantee (NEG) What is the - - PowerPoint PPT Presentation

Energy Security Board National Energy Guarantee (NEG)

What is the NEG? The National Energy Guarantee (NEG) is a mechanism designed to integrate energy and emissions policy in a way that encourages new investment in both low emissions technologies and in dispatchable energy such that the electricity system operates

• reliably. Providing long-term policy confidence is critical to lowering investment risk in

the National Electricity Market (NEM) and bringing down electricity prices.

Reliability The NEG requires retailers to have contracts in place to support a minimum amount

• f dispatchable energy to meet consumer and system needs.

Reliability

• AEMO forecasts annually whether the reliability standard is likely to be met (or not) in

each NEM region over a 10-year period

• Where reliability gaps are identified, the market will have the opportunity to invest to

resolve any gap in resources

• If a material gap persists or emerges 3 years from the period in question, AEMO will

apply to AER to trigger the reliability obligation.

Simplified timeline for various components of the reliability obligation

Emissions Reduction The NEG requires retailers to have contracts in place that support Australia’s international emissions reduction commitments.

Emissions Reduction

• An emissions registry will allow market customers to be allocated a share of a

generator’s output and its associated emissions, for which they have obtained the rights

• The registry automatically matches emissions to each market customer based on the

generation allocated against their load

• The AER will compare each market customer’s average emissions intensity against the

electricity emissions intensity target to assess compliance

Simplified timeline of compliance period for emissions reduction requirement

Will NEG Lower Electricity Price?

“The price savings from the Guarantee are expected to be broad-based, with all NEM Jurisdictions expected to benefit from lower electricity prices as a result of the Guarantee.” – ESB , NATIONAL ENERGY GUARANTEE 01 August 2018

$35 /MWh $45 /MWh $55 /MWh $65 /MWh $75 /MWh $85 /MWh

Without the NEG

With the NEG

NEM Wholesale Prices

$35 /MWh $45 /MWh $55 /MWh $65 /MWh $75 /MWh $85 /MWh $95 /MWh $105 /MWh Victoria South Australia Tasmania New South Wales Queensland

HOW?

NEG provides policy confidence and stability.

• Removes additional financing costs associated with policy uncertainty
• Underpin the continued confidence in the market resulting in further commitment of

1,000 MW renewables

• Increase long-term contracting volumes as all retailers and large market customers

will be required to have a reliable level of firm contracts

• Reduce ‘strategic bidding’ typically employed during periods of tight supply and

demand

Will NEG reduce Emissions?

Great Question?

“The Guarantee has been designed as a technology-neutral mechanism that applies to the whole market so that it can achieve emissions reductions at least-cost.– ESB , NATIONAL ENERGY GUARANTEE 01 August 2018

• 2.00%
• 1.50%
• 1.00%
• 0.50%

0.00% 0.50% 1.00% 1.50% 2.00%

NEM Generation mix No Policy vs NEG

Black coal Brown coal Natural gas Liquid Fuel Hydro Wind Solar Rooftop solar PV

Source: ENERGY SECURITY BOARD FINAL DETAILED DESIGN 1 August 2018

http://coagenergycouncil.gov.au/publications/energy-security-board-%E2%80%93-final-detailed-design-national- energy-guarantee