Declaring that “there is no going back from the massive industrial, technological and economic changes facing our electricity system,” the review of Australia’s electricity market led by Chief Scientist Alan Finkel has, as expected, recommended a Clean Energy Target as the primary mechanism for establishing a reliable and secure energy sector.
The review, released this afternoon, puts forward a significantly different regulatory framework for the electricity market composed of:
- A Clean Energy Target to commence after 2020, based on an agreed emissions reduction trajectory out to 2050. A CET will produce better price outcomes than an emissions intensity scheme, the report says — and both will produce better price outcomes than the status quo.
- “A requirement for all large generators to provide at least three years’ notice prior to closure.”
- A “Generator Reliability Obligation” that will require new generators to guarantee that “adequate dispatchable capacity is present in each region” — which will require new renewable generation facilities to have on-demand back-up or storage facilities.
- Curbs on the ability of power companies to appeal regulator pricing decisions, which are currently being stalled by some states.
- A suite of “Energy Security Obligations,” including requiring transmission companies to provide “a sufficient level of inertia for each region or sub-region, including a portion that could be substituted by fast frequency response services”.
- Better coordination and preparation for recovery after major blackouts, more rigorous governance and a significantly stronger Australian Energy Market Operator that would be involved in better planning of the network and information collection on reliability and security.
The review makes clear that the fantasy of climate denialists that coal continues to play a major role in the future of Australian energy simply won’t happen. “Australia’s coal fleet is old and coming towards the end of its design life. Investors have signalled that they are unlikely to invest in new coal-fired generation,” it says. Its modelling concludes that for both residential consumers and industry, a Clean Energy Target — which would operate like the current Renewable Energy Target, but be extended to any generation technology below an identified emissions intensity threshold, will produce lower prices than an Emissions Intensity Scheme or if the current “business as usual” scenario continues.
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However, the review doesn’t recommend a preferred emissions threshold for a Clean Energy Target, saying this is a role for government. Coal industry rentseekers and their lobbyists, like the Minerals Council of Australia, will be pushing for a high threshold in order to ensure that current coal generation technology could be included as “clean,” defeating the intention of what the Review says should be an “orderly transition” to a zero-emissions energy sector by 2070.
The review also joins the chorus of demands for significantly greater transparency in the badly corrupted gas market, saying: “AEMO should have better oversight of gas supply contracts for gas-fired generators … Gas industry performance data should be transparent, clear and accessible.”