On 15 February 2018, the Energy Security Board (ESB) released a consultation paper with further principles on the design of the proposed National Energy Guarantee (Guarantee).

The ESB's paper proposed a design for an emissions requirement and reliability guarantee that will require retailers to contract with, or directly invest in, generation, storage or demand response. The ESB's paper raised numerous questions regarding how the proposed Guarantee might work in practice.

AGL welcomes the ESB’s proposed approach to integrate emissions reductions policy with energy policy through the proposed design of the Guarantee.

With careful consideration given to the detailed design, we believe the Guarantee can contribute to a more sustainable energy market for the long-term benefit of customers in Australia.

We consider that the design of any mechanism must principally address:

Cost - The Guarantee should be designed with the greatest regulatory efficiency possible, which consists of minimal disruption to existing markets and at the lowest net cost to customers.

Emissions - The Guarantee should ensure that the NEM achieves its pro-rata share of Australia’s international commitment for emissions reductions with a view to ramping up to a potential of net zero emissions by 2050.

Reliability - The Guarantee should provide direction on the appropriate mechanisms by which reliability can be maintained as a result of increasing amounts of intermittent generation.

Certainty - Objectives of the Guarantee must enhance the existing operation of the market and also consider other market reforms and reviews.

Competition - Competitive, transparent, efficient, and liquid markets for energy and other products must be encouraged and enhanced to drive lowest cost outcomes.

The development of a high-level proposal by the ESB that can inform policy-makers is a first step to further consultation and discussion on the optimal mechanism to meet the energy sector’s objectives.

We look forward to working closely with the ESB and our stakeholders to achieve this critical goal.

If you would like to read AGL's submission to the ESB it is available here.