A clean energy target was one of the central policy planks recommended by the Finkel Review, a government mandated review into the energy market. The idea was to provide an incentive for new low emissions forms of energy generation.

But the Government wrote off the policy. Instead recently it backed the National Energy Guarantee - an alternative policy recommended by the Energy Security Board (the body charged with implementing the Finkel Review's findings). The NEG is supposed to deliver more affordable and reliable energy while meeting Australia's international obligations (read the Paris Climate Agreement). The details:

  • a reliability guarantee. This requires retailers to buy energy from a mix of sources. The sources must include a minimum amount of generation that can be called on at any time (such as coal, or pumped hydro, as opposed to intermitted sources such as wind or solar); and
  • an emissions guarantee. This requires retailers to buy energy at certain emissions levels consistent with international obligations.

So far there have been limited details on how the policy will work. We're left wondering if it will be good, or bad, or a bit of both.

The Government characterised the approach as a win for free markets (yay!). Whatever technology the energy market needs solar, wind, coal, gas, batteries or pumped storage will receive investment, so the Government won't "choose winners". But we don't know the extent to which the NEG will encourage new investment in clean energy. We do know that the policy prioritises reliability and carbon abatement, over a prescribed amount of new clean energy investment, and leaves room for investment in coal. We'll let you judge if that's a good thing.

Our view: Government investment in clean energy isn't about choosing winners it's about making policy decisions based on the evidence. On the evidence clean energy investment can be economically sound, and morally good.

So where does all this leave us? Yet more discussion, consultation and clarification we expect: so continuing to kick the can down the road on energy policy.