Key points to chief scientist Alan Finkel’s report into the national electricity market and how to fix it
What is the Finkel report and how will it affect South Australian consumers? Political reporter ADAM LANGENBERG explains.
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CHIEF scientist Alan Finkel’s report into the national electricity market, released on Friday, has been billed as providing much-needed clarity about how to fix its woes.
The report has particular implication for South Australians, who face soaring power prices and the threat of blackouts next summer.
Here are some of his key recommendations:
INTRODUCING A CLEAN ENERGY TARGET
The report recommends adopting a Clean Energy Target — where energy retailers like AGL and Origin have to source a higher percentage of energy from low emissions sources.
Dr Finkel says this should reward low-emission generators that enter the market.
Crucially, the target differs from models like an Emissions Intensity Scheme because it doesn’t punish “dirty” generators that rely on fossil fuels.
It’s that lack of punishment for coal generators that makes the approach much more palatable for the Federal Government than an EIS.
The report stops short of saying exactly what the Clean Energy Target should be — Dr Finkel suggests that process should be done by governments — but under a scenario modelled in his report, wind and solar generation would steadily rise while coal would drop to 53 per cent of all generation by 2030.
Premier Jay Weatherill has consistently pushed for an EIS, but Dr Finkel recommends the Clean Energy Target because it has slightly better price outcomes and can be implemented quicker.
Dr Finkel’s modelling showed that adopting either a Clean Energy Target or EIS was markedly better for consumers — and their bills — than the status quo.
BETTER SYSTEM PLANNING
Mr Weatherill and SA Energy Minister Tom Koutsantonis have long complained that the national energy market prioritises certain states over others and Dr Finkel agreed with them.
While he’s widely supportive of South Australia’s $550 million energy plan, Dr Finkel recommends a considered national approach rather than states going it alone.
He says the market should do more of what its name suggests — ensure the viability and security of the national system.
Dr Finkel says that means the Australian Energy Market Operator should play more of a role in planning what the transmission network will look like in the future.
He says that a grid plan is needed to create a network that stimulates new renewable generation, so that transmission businesses build the right infrastructure.
NOTICE OF CLOSURE
Under Dr Finkel’s plan, all large-scale generators must give three years’ notice to the market before closing.
That will allow the market to respond and give time for other generators to come online and fill the gap.
The three-year time frame is a reaction to Alinta Energy giving notice just 11 months before it closed the Northern Power Station and Playford B, its two South Australian, coal-fired generators.
Engie gave only five months notice before it closed its Hazelwood Power Station — which provided a quarter of Victoria’s electricity — in March.
Dr Finkel said those short notice periods were not unusual, but were “well below the time required for replacement generation to come online”.
WHAT DOES IT MEAN FOR CONSUMERS
We’ll feel the pain in the short-term — AGL’s 18 per cent price hike for residential South Australian consumers, reported in The Advertiser on Saturday, is testament to that — but Dr Finkel said the clean energy target and better planning would put “downward pressure on prices”.
What that means in monetary terms is anyone’s guess — as prices are volatile and at the mercy of a whole lot of factors, including transmission and retail costs, as well as the wholesale price.
WHAT DOES IT MEAN FOR SA?
Dr Finkel’s report paints a pretty bleak picture of the South Australian energy market in the short term.
He points to forecast shortfalls in both SA and Victoria — where forecast demand outstrips supply — and restates the risk there could be insufficient generation in both states on very hot days.
Shortfalls increase the risk of load shedding — where power is cut to selected suburbs — and blackouts.
The forecast shortfalls have been compounded by the recent closure of Hazelwood and means Victoria is likely to be importing energy, rather than sending it to South Australia through an interconnector.
Dr Finkel says he’s widely supportive of SA’s energy plan, which will see the State Government buy a gas-fired generator and a large-scale battery and install temporary generators.
But the message is pretty clear. If there are delays with that, or a lack of market response, South Australians faces the lights — and air conditioners — switching off this summer.
HOW WILL POLITICIANS RESPOND?
The Coalition much prefers a Clean Energy Target to an EIS, but exactly what the target is set at will have a direct impact on the level of support within government.
If it’s set too low for coal generators to benefit, conservative MPs like former Prime Minister Tony Abbott will campaign heavily against it.
Labor is broadly supportive of the target, but much will depend on the detail.
Green groups accept most of Dr Finkel’s recommendations but have criticised the report for “overplaying” the importance of gas generation going forward.
Mr Weatherill said the SA Government “strongly supported the report but “there’s an enormous amount of work to be done”.
State Governments have agreed to consider the report in detail before meeting again in August.