NSW will miss its net zero target – unless we get our act together. Here’s how we can

NSW is not on track to meet its legislated net zero greenhouse gas emissions by 2050. In fact, we’re not even on track to meet our interim targets of 50 per cent below 2005 levels by 2030 or 70 per cent by 2035. Instead, we’re currently projected to be emitting 25 megatonnes (that’s 25 million tonnes) by mid-century.

We need to change our approach to the transition to meet the targets. Delivering on these targets while maintaining living standards requires careful co-ordination of policy, investment and technology deployment.

The Darlington Point solar farm, in the Riverena, contains almost 1 million solar panels and provides cheap, clean green energy to more than 110,000 homes.Credit: Matt Beaver/Department of Climate Change, Energy, the Environment and Water 

The NSW Productivity and Equality Commission recently published Ensuring a Cost-Effective Transition, the first report in a three-part series. It details why the transition is a productivity and cost-of-living issue, and where changes need to be made.

Australia is yet to adopt an economy-wide price on greenhouse gas emissions. We currently have the federal government’s safeguard mechanism, but this covers only a fraction of emissions in NSW. There is scope for it to be rolled out more widely. Or for the states to step in and “price carbon” from sources not covered by the safeguard mechanism. But, for the time being, we need to focus on cost-effective, predictable, technologically neutral interventions.

All four remaining NSW coal generators are scheduled to close by 2040, three within the next nine years. Properly co-ordinating the rollout of utility-scale renewables, storage and consumer energy resources can score big, near-term emissions cuts. It’s also essential to keep the lights on.

Beyond that, electrification is key. Getting our buildings, industries and transport systems off fossil fuels is possible by electrifying them into a near-zero emissions electricity system. The NSW Electricity Infrastructure Roadmap and the Commonwealth Capacity Investment Scheme are driving the transition of the National Electricity Market. However, these strategies to add lots of solar, wind, batteries and pumped hydro aren’t enough.

Many energy projects have been delayed. This is partly explained by planning system inertia. Another challenge – one I highlighted in my recent housing review for the NSW premier – is construction sector capacity. Continuing record-high public infrastructure spending is simply not compatible with the necessary transformation of our energy system.

This is an example of what economists call “opportunity cost”. Dialling back infrastructure spending is one way to support private investment in the net zero economy. Less pressure on our limited labour, material and freight resources means lower costs. This can accelerate the energy transition and contain customer bills.

But building an electricity system for unlimited peak demand is not a recipe for a cost-effective transition. Managing energy demand can reduce costs and support reliability. Depending on season, weather and time of day, the cost of electricity varies. Cost savings can be achieved if we shift demand to cheaper times, where possible.

The electricity market is already pursuing the potential of digital technology through “demand response” and “virtual power plants”. These innovations should be complemented by expediting the rollout of smart meters and, eventually, mandating cost-reflective electricity pricing.

Smart meters can register time-of-use by energy customers, communicating this back to retailers. Digital applications can signal to customers when electricity costs are lower and when they are higher. Households would be empowered to run their appliances at times when they know they will be charged a lower price. This would be of particular benefit to low-income earners.

All this can limit system costs, which are ultimately borne by consumers and taxpayers. Cost-of-living pressures would be alleviated. It would also support energy reliability and help deliver on our legislated emissions-reduction targets.

The longer we wait, the more it will cost to fix the emissions shortfall. The sooner we act, the more certain we can be that the NSW of 2050 will be one of the best places to live, work, start a business and raise a family.

Peter Achterstraat is NSW Productivity and Equality Commissioner.