Finkel fix for NEM

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 06 Jul 2017   Posted by admin


Chief Scientist Dr Alan Finkel. Image: Mark Graham.

 

BY ELIZABETH FABRI

 

CHIEF Scientist Dr Alan Finkel’s final review into the National Electricity Market (NEM) has been labelled a ‘way forward’ for the energy industry, promising improved reliability and lower costs for consumers.

 

The Blueprint for the Future Security of the National Electricity Market, commissioned by the COAG Energy Council last October following South Australia’s State-wide blackouts, included 50 recommendations addressing the four key outcomes of increased security, future reliability, rewards for consumers, and lower emissions.

Since its 9 June release, almost all recommendations had been backed by the Turnbull Government; but the jury was still out on the implementation of a nationally agreed Clean Energy Target (CET) by 2020.

The CET was intended to have a similar role to the existing Renewable Energy Target (RET) assisting Australia in reaching its Paris Agreement commitments, but also incorporating technologies such as coal with carbon capture.

 

“In Australia, we held public and private consultations in every region of the National Electricity Market [and] received 390 written submissions,” Dr Finkel said.

 

“The overwhelming message was the call for Australia to adopt a single, nationally agreed plan to manage the transition to a lower emissions economy.

“The National Electricity Market is 5000 kilometres long, spans five states and one territory and has more than 9 million metered customers. It’s essential that we get it right.”

Under CET modelling, there would be 42 per cent renewable energy generation in 2030, with the greatest proportion coming from large scale solar and wind (24 per cent), alongside existing coal generators, which would supply 53 per cent of Australia’s electric energy.

But if the price of gas came down in the future to lower than what was currently estimated, Dr Finkel said gas would contribute to a greater extent.

“Consistent with the technology neutral approach to achieving the outcomes, we did not recommend any prohibitions on technology,” he said.

“As an example, if a coal plant were to be built with carbon capture and storage it would benefit under the Clean Energy Target at nearly the same rate as a wind or solar farm.”

The report also recommended the Federal Government establish an Energy Security Board; adopt a package of Energy Security Obligations by mid-2018 that would require new generators to have fast frequency response; and the Australian Energy Market Operator (AEMO) be given a “last resort” power to enter into commercial arrangements in emergency situations.

Large generators would also have to provide at least three years notice prior to closure, and large and small consumers would be rewarded for reducing their energy consumption in peak demand.

Energy minister Josh Frydenberg said the review intended to provide an outline for the “once-in-a-century transformation currently taking place in Australia’s energy system”.

On 20 June, the minister confirmed the Government would advance 49 of the 50 recommendations, and would need to review the CET further before making a decision.

“The Clean Energy Target, as you know, will be further considered by the government and more analysis will be undertaken,” Mr Frydenberg said.

“But the other recommendations that will enhance the reliability of the system, increased governance, require wind and solar to provide battery storage and the like, they will be advanced now through the COAG Energy Council with the support of the Commonwealth.”

Clean Energy Council chief executive Kane Thornton said the report presented a unique opportunity for Australia to end the current energy crisis.

“One thing is clear: the ongoing cost of uncertainty from a lack of national energy policy now exceeds the cost of introducing one,” Mr Thornton said.

“Our political leaders now need to work together to finally resolve the chronic uncertainty facing Australia’s energy sector.
“Having a long-term, market-based and technology-neutral policy in place will be much more effective than the continued ad-hoc policy and regulatory change that has resulted in the current energy crisis for Australia.”

 

 

Finkel Review: the reaction

 

APPEA chief executive Malcolm Roberts

“While the gas industry prefers an economy-wide market mechanism, a Clean Energy Target could reduce emissions from electricity generation. To work, a target must be realistically ambitious – set at a level that winds back our dependence on coal-fired generation without jeopardising energy security.”

 

Former Prime Minister Tony Abbott

“We all know there’s no such thing as a magic pudding. If you are rewarding one type of energy, inevitably that money’s got to come from somewhere, either from consumers or taxpayers. If it’s from consumers, well it’s effectively a tax on coal and that’s the last thing we want.”

 

SACOME chief executive Rebecca Knol

“The report defines the key components needed to operate an affordable and secure energy future. We need to address our current challenges in a collaborative manner, based on technology neutrality. Challenges with managing the transition in South Australia to a secure and low emissions future has resulted in volatile prices, outages and uncoordinated withdrawal of thermal generation.”

 

Australian Energy Council chief executive Matthew Warren

“What he [Dr Finkel] has proposed is a clear improvement on what we have now; a move from a Renewable Energy Target to a Clean Energy Target combined with a Generator Reliability Obligation (GRO). The GRO requires all new generation to meet minimum requirements to keep the grid secure.”

 

Nationals backbencher George Christensen

“Knowing the history of climate policy in this place, there is no way that we are going to have policy certainty and therefore investor certainty, and therefore the [Clean Energy Target] plan won’t lead to lower power prices.”

 

Energy Efficiency Council chief executive Luke Menzel

“Energy intensive industries are grappling with a new reality – a world of massive price hikes, reliability issues, and inherent volatility in gas and electricity markets. It’s essential Australia’s energy ministers work together to fix both the supply side and the demand side of the market. The release of the Finkel Review is our opportunity to do just that.”