| July 1, 2022

Strong support for the renewable energy transition

The Smart Energy Council has welcomed comments by Energy Minister Chris Bowen to accelerate energy storage, large- and small-scale renewables, and transmission infrastructure.

“Members can be assured that we have a federal government that is keenly engaged and responsive to the needs of our members,” John Grimes said following a meeting with the Minister earlier this week.

“The government is fully committed to a transition plan that will see a massive build out of renewable energy in the coming years.”

ALP aspirations were spelt out by Federal Energy Minister Chris Bowen at the National Press Club on June 29, where he announced the “simple, yet powerful” shape of the Albanese Government’s Climate Change Bill that will be put before Parliament when it resumes in late July.

The first of the Bill’s four essential elements will be to seek to enshrine in law the Nationally Determined Contribution of 43% emissions reduction by 2030 and net zero emissions by 2050.

The ALP will also explicitly task, in law, the Climate Change Authority to assess and publish progress against these targets and advise Government on future targets, including the 2035 target, Bowen stated.

Thirdly, the ALP will legislate a requirement for the Minister for Climate Change to report annually to Parliament on progress in meeting targets, a mechanism the Minister casts as not unlike the annual Closing the Gap statement: forcing the Government to be transparent about progress and plans, and obliging the Opposition of the day to share its views.

“And finally, as part of consequential legislation, we will insert the nation’s targets in the objectives and functions of a range of government agencies including: ARENA, CEFC, Infrastructure Australia and the NAIF,” Minister Bowen said

“This is what we will put to the Parliament.”

The plan addresses many of the concerns raised during last week’s State Energy Summit Victoria, where John Grimes commented that the energy market transition very much needed a coordinated approach with a detailed plan for the market to follow.

Vic Summit John

“We need to get on with this today – it’s an urgent build-out task; the federal Labor party says its policies will deliver 82pc renewables by 2030 and in line with that we must install the storage that unlocks the value of renewable energy,” he said.

The ‘elephant in the room’ however is the Energy Security Board’s proposed capacity mechanism, and much depends on the final design of the document.

Bruce Mountain told the State Energy Summit Victoria held in Melbourne that “Governments across Australia have set substantial targets to moderate renewable targets that will result in carbon emissions reductions (on 2005 levels) and we could argue they should go further.

“But critically, the ESB’s capacity mechanism does not factor in the greenhouse gas impacts, it fails fundamentally on that point.

“The Commonwealth’s renewables target of 82 per cent by 2030 is roughly consistent with the step changes in AEMO’s Integrated System Plan, however enormous and rapid expansion in storage and variable renewable energy (VRE) are needed by 2030 to meet those targets.”

This requires major structural change, said Bruce who heads the Victorian Energy Policy Centre.

“Paying the fossil fuel market to fulfil their purpose, that is to supply energy, will only encourage them to remain in the market.”

Under the current proposal the bulk of capacity mechanism payments will flow to the existing fossil fuel generators; some, but not much, may go to battery storage, therefore existing incumbents will be in an advantageous position.

“Subsidising fossil fuel generators will undermine storage expansion needed to achieve the government’s targets and actively undermine storage and financing of storage, therefore undercut the government’s underlying objective,” Bruce told State Energy Summit Victoria delegates.

“If the objective is to achieve 82 per cent renewable energy by 2030 and reliable electricity supply at least cost, it’s hard to imagine a scheme that could be less effective than the one they [the ESB] have come up with.

“If I had a magic wand I’d pull the mechanisms and disband the ESB which was created to implement the Finkel reviews changes and has since changed focus.”

He would also instruct the AER, AEMC and AEMO to quantify the greenhouse gas impact of all decisions and proposals they make, declaring “Making it clear is critically important.”

The RET should also be expanded and a REST – storage target – introduced to incentivise storage targets set by AEMO, with the issuing of credits and permits, and generators and large retailers obliged to buy a certain number.

Bruce would also encourage states to progress their policies that support the rapid replacement of coal and gas with storage and variable renewable energy.

“I cannot stress enough how this must be the focus of state government policy right now,” said Bruce who also had a word of advice for ministers worried about capacity shortfalls 

Addressing the Summit too was Johanna Bowyer of IEEFA who emphasised the impact of the capacity mechanisms proposal to lock in a legacy high emissions in the energy system.

“Under the mechanism high emission generators will be paid the same as low emissions generators and this will only prolong the existence of coal plants in the system, while discouraging new entrants for new capacity into the market,” she said.

This is contrary to what’s required under the ISP’s step change requirements.

Based on West Australia’s experience the capacity mechanism could cost several billion dollars, with households needing to find an extra $430 a year

Johanna outlined a range of international experiences in energy capacity mechanisms, the limitations on coal production and impact on decarbonisation. She says Australia needs to learn from this. 

“We need to provide certainty around coal plant exits, instead decarbonisation will be delayed and it will be a high cost proposition,” Johanna said. 

 

 

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