The Australian National Energy Guarantee: key design issues for the proposed new energy policy

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30th October 2017
SydneyAustralia's Coalition Government announced its proposed new energy policy on 17 October 2017, based on advice from the recently constituted Energy Security Board (ESB). The proposed policy is to introduce a National Energy Guarantee (NEG) comprising (1) a reliability guarantee (RG) and (2) an emissions guarantee (EG). While the policy proposes the use only of existing contractual mechanisms, the effect is to create a separate bilateral market for dispatchable capacity and a form of emissions market. The proposed policy could provide a framework within which the sector can evolve sensibly to meet its current challenges. However, the detailed approach to implementation matters, while at the time of writing there is limited information available, the current information indicates that there is a risk that the proposals may decrease liquidity in energy contract markets (through the creation of sub-markets), incentivise vertical integration and reduce competition in energy retailing. Having noted these concerns, the key elements of the policy remain unclear, and will be developed as discussions with other stakeholders proceed.

In our article we focus on policy design issues.

by:

JMB                    JC
Jonathan Mirrlees-Black      Joel Cook
Director, Australia               Principal, Australia