Australian States Delay Approving New Energy Policy

Australia's states on Friday held off approving a plan to end more than a decade of climate and energy wars and spur investment in new power supply, disappointing industry seeking certainty on energy policy.

Prime Minister Malcolm Turnbull is pushing a National Energy Guarantee (NEG) in a bid to bring down electricity prices, which have more than doubled over the past decade, and ensure supplies following a string of blackouts in 2016 and 2017.

Energy Minister Josh Frydenberg said after a meeting with state governments that it had been "an important step forward" for the plan, which has been under negotiation for nearly a year.

However, he criticized last minute demands, particularly from the state of Victoria, which do not bode well for a final agreement.

The policy needs unanimous approval from Australian states to go ahead and requires federal legislation, but Victoria, Queensland and the Australian Capital Territory pushed for more ambitious emissions targets.

The current plan still has to pass the Federal Coalition party room, which is due to meet next week.

Pro-coal former Prime Minister Tony Abbott and rural-party Nationals members in Turnbull's coalition do not want to give any future Labor government the power to easily raise emissions reduction targets and make coal-fired electricity less competitive.

Victoria, where the government faces an election in November and stands to lose seats to the Greens, want emissions reduction targets that can only be strengthened over time, with targets to be reviewed every three years, and future targets to be set by regulation rather than legislation.

Frydenberg ruled out allowing future targets to be set by regulation, saying that would remove any policy certainty.

Friday's meeting had been expected to take the proposal forward, but the latest hurdles frustrated industry.

"The policy paralysis of the last decade needs to end," Sarah McNamara, chief executive of the Australian Energy Council, which represents power and gas companies, said on Friday.

The NEG, designed by an independent Energy Security Board, has won broad support from power producers clamouring for clarity on carbon policy to support new power investments, as well as from businesses, farmers and consumer groups battling high and volatile electricity prices.

Under the plan, power retailers, led by Origin Energy (OGFGF.PK) , AGL Energy and Energy Australia, would be required to meet reliability and emissions targets.

The aim is to ensure there is enough "dispatchable" energy, power to back up intermittent wind and solar power, and cut carbon emissions from the sector by 26 percent from 2005 levels, in line with Australia's Paris Climate Accord target.

Modelling showed the NEG would bring down wholesale power prices by more than 20 percent from where they would be without the policy and the share of renewable energy generation sent out in the national market would more than double by 2030.

(Reporting by Sonali Paul; editing by Eric Meijer and Richard Pullin)