Design an energy market for post-2030 or risk chaos: Origin Energy CEO Frank Calabria

Australia must urgently develop energy market rules for beyond 2030 or risk an economic catastrophe, Origin Energy chief executive Frank Calabria has warned.

Australia must urgently develop energy market rules for beyond 2030 or risk an economic catastrophe similar to what is likely to be triggered by the looming gas shortfall, the CEO of Origin Energy, Frank Calabria, has pleaded.

The comments underscore broad concern within Australia’s energy industry that too much focus is being placed on transitioning the energy grid in the lead up to 2030 and insufficient time and energy is being put in shaping the market structure into the next decades.

The federal Labor government has focused much of its energy reform efforts on accelerating the transition away from fossil fuels between now and 2030 as it moves to meet its centrepiece target of having renewables deliver 82 per cent of the country’s energy by the end of the decade.

Labor is under intense pressure to prove that it can deliver the transition and reduce household bills, a conundrum that saw the government promise to use taxpayer funds to underwrite 32GW of new capacity by 2030.

Mr Calabria said progress was being made on 2030 target, but Australia must not be short sighted – a thinly veiled urge to accelerate work on market reforms beyond 2030.

The Australian Energy Regulator is leading work on the post-2030 market design, but Mr Calabria noted the country’s industry is still awaiting a terms of reference, and Australia cannot afford to wait.

“The energy transition does not end in 2030, it is a multi-decade transformation of every aspect of the energy supply chain,” Mr Calabria said in a speech in Sydney.

“Therefore this review is important because it needs to facilitate significant infrastructure, investment and outcomes in the period beyond 2030.”

Mr Calabria said the private sector needed clarity around the legislative landscape if it was to invest in renewable energy projects, and allowing current market rules to linger would not deliver the new capacity needed for post-2030.

Mr Calabria said the centrepiece energy policy is the government’s Capacity Investment Scheme, which uses taxpayer funds, but this does nothing to mitigate the post-2030 issues.

He described the Capacity Investment Scheme as a “short-term, tactical scheme to meet 2030 emissions targets”.

If issues were not resolved, Mr Calabria said, there would be the heightened risk of price increases or even blackouts, and the imminent crisis from a looming east coast gas shortfall showed the consequences of inaction.

“To understand the significant consequences of extended periods of policy uncertainty or poorly designed market interventions, then look no further than the east coast gas market,” he said.

While Origin – the country’s latest electricity and gas retailer – noted the post-2030 market design review had yet to begin in earnest, Mr Calabria said a European-style capacity investment scheme would be the most logical approach.

A capacity scheme pays energy developers a fee to have specific quantities of capacity available. Australia mulled a similar scheme under the Morrison government but it was eventually curtailed by Victoria’s opposition to including gas.

A capacity scheme theoretically could be technology agnostic, allowing for the policy to coexist with the Coalition’s nuclear plan. The Coalition has said that if elected it would build seven nuclear power stations, and a capacity scheme would then simply tender specific quantities of electricity capacity needed.