Published: 01/07/2017

This past quarter saw the Finkel Review, billed as the blueprint for the National Electricity Market, make a range of recommendations on how to deliver reliable, secure and affordable electricity in a lower emission environment.  

The review, commissioned by the Federal and State energy ministers, was prompted in part by soaring electricity prices, as well as the recent South Australian blackout which has raised concerns about the stability of the system and reliability of renewable energy sources such as wind and solar. To address this, the review recommends that all new wind and solar plants be equipped with back-up batteries and storage to increase dependability.

Another highlight of the review is the new ‘Clean Energy Target’, recommended to replace the existing ‘Renewable Energy Target’ in 2020. The new policy, unlike its predecessor, would be technology-neutral where any generator producing power below a baseline of emissions set by the government would be regarded as ‘clean’ regardless of whether it be from wind, sun, hydro, gas or even coal. Retailers would be required to buy a certain proportion of their electricity from these ‘clean’ generators. This reignited the debate surrounding the definition of ‘clean energy’ to include new coal, as it is expected to have a slightly lower emissions profile than generators built decades ago. Under this proposal, coal-fired generation is expected to provide up to one quarter of Australia’s electricity generation by 2050.

Meanwhile, the report also lists concerns over the nation’s fleet of ageing coal-fired generators. Over the past three months, two of the biggest coal-fired power stations – Hazelwood and Loy Yang A -  closed down, with a further seven due to close in the next 20 years.

Given few replacements are being built to offset these closures, due to low investor confidence arising from uncertainties around ever-changing policies and emissions reduction targets, the electricity market is turning to gas-fired power stations to fill the gap.

However, this comes amidst the execution of three new enormous gas export contracts, leaving scarce resources and consequently pushing up gas prices. To better manage future closures, the review recommends that generators provide three years’ notice instead of five months, as was the case at Hazelwood.

Overall, the policy has left climate change groups unhappy that the new Clean Energy Target is not ambitious enough for a once-in-a-generation opportunity to reform the electricity sector. Despite Dr Finkel acknowledging that the cost of wind and solar is cheaper than both coal and gas-fired generation (even without taking into account carbon emissions and the environmental impacts of fossil fuels), it is unfortunate the recommendations have not featured renewables more strongly.

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