Frydenberg talks up blackouts as top advisor concedes no forecast power shortages
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Frydenberg talks up blackouts as top advisor concedes no forecast power shortages

The top advisor on the Turnbull government's signature energy plan concedes official forecasts show electricity supplies will remain adequate, even as Environment and Energy Minister Josh Frydenberg warned states that blocking the plan risked plunging homes and businesses into blackouts.

The nation’s energy ministers will convene in Sydney on Friday to decide the future of the contentious policy, the National Energy Guarantee. Labor states including Victoria have expressed grave concerns over the policy and say the deal should not be rushed simply to meet the federal government's timetable.

Official forecasts say electricity supplies will be reliable for at least ten years.

Official forecasts say electricity supplies will be reliable for at least ten years.

Mr Frydenberg on Thursday said his government was “not ceding” to Victoria’s demands to alter the policy.

“They are being dictated to by the Greens, they need to stand up for the interests of Victoria and indeed, not prevent a historical national reform," he said.

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“If they do they will be guaranteeing Victorians are subject to higher power prices but also the risk of blackouts, and that is not on.”

The energy plan would require electricity retailers to ensure both electricity from low-emissions sources, and a set level of reliable power that can be delivered on demand.

The chair of the Energy Security Board, Kerry Schott, says despite forecasts of reliability, electricity supplies will tighten in some states.

The chair of the Energy Security Board, Kerry Schott, says despite forecasts of reliability, electricity supplies will tighten in some states.Credit:Alex Ellinghausen

The government wants the reliability safeguards implemented by July next year to address challenges to supply, including the pending closure of the Liddell power station.

Kerry Schott, chair of the Energy Security Board which drafted the policy on behalf of the government, on Thursday said the energy ministers should grant their approval.

Illustration: Matt Golding

Illustration: Matt Golding

“Otherwise [the policy] probably cannot be done because of parliamentary and election timetables – and the implementation is needed before the middle of 2019,” she said.

However a report by the Australian Energy Market Commission in April found that the current reliability standards were “achieving their purpose” and were likely to do so until at least 2024.

The Australian Energy Market Operator has also not forseen a gap in the reliability of supply for at least 10 years - even taking into account Liddell’s closure.

The energy plan will require electricity retailers to source some supplies from low-emissions sources such as solar.

The energy plan will require electricity retailers to source some supplies from low-emissions sources such as solar.

Dr Schott told Fairfax Media that “at the moment it’s true, there is no forecast reliability gap on an ongoing basis”.

However the industry was not capable of reacting to changes overnight and “you’ve got to have something in place to meet anticipated gaps that might arise”.

“You can see looking into the future things are going to get pretty tight in some states and particularly at some times of the year and some periods of day,” she said.

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“You can’t sit back... and think everything is going to be alright. We’ve been through a decade or more of having plenty of capacity and we are no longer in that situation as a generality.”

NCEconomics principal Salim Mazouz, an environmental economics expert who advised the ACT government on the National Energy Guarantee, said while the fallout of the Hazelwood power station closure may affect supplies this summer,  this was a short-term issue and the energy plan “has longer term planning horizons".

Mr Mazouz said the Energy Security Board had not explained how the policy would address short-term reliability issues prompted by a coal fired plant closure “even though this is the biggest reliability issue we face over the coming years and decades”

He questioned the energy plan’s reliability mechanisms in light of official forecasts.

“Either the regulator in charge of ensuring reliability is asleep at the wheel or the NEG is essentially pulling wool over our eyes. They haven’t sufficiently elaborated on the sorts of reliability issues they are trying to address, so [the policy] remains not so credible," he said.

Nicole Hasham is environment and energy correspondent for The Age, The Sydney Morning Herald, Brisbane Times and WAtoday.