Publications

Australia Energy Market Report - June 2017



Commentary

Pricing: Pricing declined in NSW by 15.2%, 11.9% and 11.5% respectively for calendar years 2018, 2019 and 2020. In Victoria, pricing declined by 8.7%, 2.9% and 7.7% for the same periods. Pricing declined in Queensland by 19.2%, 12.8% and 13.5% respectively for calendar years 2018, 2019 and 2020 and 8.6%, 11.1% and 16.8% in South Australia.

Finkel Report Review: With electricity prices soaring and uncertainty around the future security of supply, the Federal Government tasked Alan Finkel, the chief scientist to come up with a solution. More importantly, he had to come up with a solution that would be supported by all sides of politics. Otherwise, there is little prospect of it being adopted.

The key recommendations of the Finkel Report that has recently been released are as follows:

  1. A new Clean Energy Target
  2. Three Years notice of closure required for large generators
  3. New generators to support and maintain voltage and frequency

Clean Energy Target: The Labor Party has been pushing for an emissions trading scheme and the Right faction of the Liberal Party are against this. The panel were made aware that an emission trading scheme was not an option for the Government.

The Finkel Report proposes a new Clean Energy Target with the existing scheme to end in 2020.

The clean energy target (CET) would work in a similar way to the existing RET and would be aimed at encouraging investment in new low-emission power generation.

The government would set an emissions intensity target, which could be reduced over time to meet Australia’s international climate change obligations.

Electricity generators would be issued certificates for the electricity they produce in proportion to how far their emissions intensity is below the threshold. All types of electricity generation would quality provided that they were below the emissions intensity threshold.

Electricity retailers would be obliged to purchase certificates to demonstrate to the Government that a pre-determined share of their electricity came from low emissions generators.

The chief scientist and his expert panel also investigated an emissions intensity scheme (EIS) but the Federal Government had already ruled out implementing such a scheme before Dr. Finkel delivered his preliminary report.

The panel concluded that CET would have similar ability to achieve the required level of emissions reduction in the electricity sector securely and reliably, with price benefits to consumers relative to business as usual. Some others dispute this and put forward modelling to confirm that an energy intensive emissions scheme would deliver better results.

Closure of Coal Fired Generation: The report identifies the retirement of old coal-fired generators as being a major challenge.

The short notice given for the closure of the Hazelwood and Port Augusta has led to the possibility of South Australia and Victoria facing black outs next summer.

The Australian Energy Market Operator is looking at bringing on short-term generation to fill the gap, and will be offering payment for big power users to curtail their energy use if required.

Voltage and Frequency: Distributed generation connected to a network such as solar and wind can have negative impacts particularly at times of high penetration. The source of energy fluctuates widely from day to day and hour to hour. This can lead to voltage fluctuation and other technical issues which can cause failures in the network. These issues will be addressed by a generator reliability requirement for new generators. Multiple wind or solar projects could pair with a large scale battery installation or gas plant to achieve the standards. There are some fears that this could push up the costs of renewable energy projects.

These measures would need to be supported by both sides of politics to have any chance of being adopted and it is unclear yet whether this will happen. These measures would create a much better climate for new investment and hence could assist in reducing the current level of pricing.

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