Big electricity suppliers back push to end patchwork reforms
The nation’s big electricity suppliers have backed the push for an end to patchwork reforms to the National Energy Market.
The nation’s big electricity suppliers have backed the push by the federal government’s top energy policy adviser for an end to patchwork reforms to the National Energy Market, echoing calls from the Energy Security Board for a co-ordinated approach to planning and managing the NEM.
The Energy Security Board’s latest proposals for a redesign of the NEM to ease the transition to cleaner energy were released on Tuesday, winning cautious support from electricity generators and retailers as the industry works through the details of the road map to a new market after 2025 outlined by the market planner.
Outlining the challenges facing the NEM from a flood of new renewable energy into the market, particularly from solar rooftop installations promoted by state governments, ESB independent chair Kerry Schott on Tuesday called for a market-wide approach to planning, saying a failure to transform the system to deal with the entry of intermittent supply would cost the nation in the long term.
An ESB report on the health of NEM said that the security of supply remained the most concerning issue in the NEM, with cheap renewable power likely to push ageing coal-fired stations from the market ahead of their expected technical life, with urgent decisions needed about the future shape of the market needed to ensure consumers paid the lowest possible price for electricity into the future.
The ESB said a NEM-wide approach to encouraging investment in the network, to avoid market fragmentation caused by states going it alone on investment and policy decisions — such as Victoria’s decision in late 2020 to install a new “big battery” after changing the state’s electricity act, and the introduction in NSW of an Energy Infrastructure Roadmap to help smooth the state’s transition away from a coal-fired grid over time.
Australian Energy Council boss Sarah MacNamara, who represents major suppliers such as Origin Energy, said the ESB’s reported highlighted the industry’s longstanding calls for a market-wide approach to planning and co-ordinating the NEM, saying the decisions by the states and federal government to act individually to support preferred generation types had put more pressure on the interconnected network.
“While jurisdictional approaches are understandable, we continue to argue that a national and Co-ordinated approach to energy policy is the framework most likely to deliver the best results for customers — namely reliable, affordable and sustainable electricity supply,” she said.
“The Board’s backing for a NEM-wide approach to integrate jurisdictional energy plans and schemes is welcome.”
The AEC has long criticised the state and federal governments for backing their preferred generation measures — whether they be fossil fuel power stations or renewables — over market-driven investment.
In November the AEC and its major members criticised the NSW road map — which Dr Schott said this week was largely in line with priorities needed for the broader NEM — for underwriting investment in renewable and storage generation, saying it could distort the market making investment in long term solutions more difficult.
Both AGL Energy and EnergyAustralia hit the pause button on plans for build new gas-fired power stations in NSW after the state government announced its energy infrastructure strategy.
Ms McNamara said on Tuesday almost all market participants now agreed on the broad issues facing the energy sector, and what was needed was a co-ordinated approach to the solution.
“Key issues remain investment in dispatchable generation as more renewables come into the grid, as well as ensuring there is an orderly exit of older thermal plant and encouraging the right overall mix of resources and system services.”
A spokeswoman for AGL, which has been under pressure from the federal government over plans to close down its Liddell coal-fired station in 2023, said the company supported the ESB outline for a new market structure from 2025.
“We believe Australians are committed to a cleaner energy future, and that it’s up to industry, regulators and governments to ensure the transition is orderly and meets the needs of all the market participants for affordability, efficiency and the confidence necessary for investment,” she said.
The Energy Users Association, which represents large power and gas consumers, said the ESB had faced a difficult task in pushing for a unified approach to energy policy in the NEM, but said the “enormous effort” would pay dividends for consumers.
EUAA chief executive Andrew Richards said plans flagged by the ESB for generators to share the cost of new transmission lines, through Renewable Energy Zones and other measures, were a particularly welcome move for energy consumers.
“Building a nationally consistent energy policy that avoids unnecessary duplication of competing policy and regulatory frameworks that can only lead to increased costs and inefficient allocation of resources must be the goal,” he said.
“We are pleased to see the ESB recognise the issue of fair cost allocation, especially for new network infrastructure, is a critical aspect of how our market moves forward. Without a new approach to cost allocation, consumers will have to carry all the risk and costs associated with redesigning our grid and post 2025 market.”
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