Grattan Institute calls for national electricity market reforms

Anthony Albanese’s push for net zero emissions is ‘uncoordinated’, a new report warns.

The lead author of a new report says the transition from coal was ‘not going well’ with consumers ‘fuming’ about high prices. Picture: AFP

Anthony Albanese’s push for net zero emissions is “ad hoc” and “uncoordinated”, a new Grattan Institute report warns, with the think tank calling for significant reforms to the national electricity market to avoid blackouts in the post-coal era.

The research has called for the federal government to take urgent action to ensure energy security amid expectations coal will be phased out by 2030, urging the commonwealth to work with the states to ensure electricity remains affordable.

The new report, titled Keeping The Lights On, said there was mounting evidence the national electricity market “may not be able to deliver enough investment in low-emissions generation, storage and transmission, when and where it will be needed” underscoring that consumers were increasingly dissatisfied by soaring power prices.

The criticism of the transition comes amid growing divergence between the Prime Minister and Peter Dutton on climate and energy policy ahead of next year’s election, with the Coalition backing nuclear while Labor is focusing on renewables, hydrogen and accelerating the uptake of electric vehicles.

The nation’s energy market operator has issued stark warnings that the market was on course for a decade of energy instability without urgent action, with an increased risk of blackouts particularly in Victoria following unexpected delays in delivering new generation.

Alarm within the Australian Energy Market Operator has been growing as coal-fired power stations close and electricity demand increases, piling pressure on the government’s pledge to deliver more than double the level of renewable energy to 82 per cent by 2030.

The new research identified priorities for planning the net-zero system including designing a market structure that will help ensure adequate energy resources in a high-renewables system, and using direct mechanisms with coal generators to provide insurance against early or delayed plant closures that create major risk of blackouts.

“These mechanisms should maintain momentum on emissions reductions and avoid shifting excessive risks from operators to governments and consumers, while being clear and transparent to the market,” the report said.

Grattan Institute energy and climate change program director Tony Wood, a lead author of the new report, said the transition was “not going well” with consumers “fuming” about high prices and that they would not forgive governments if they failed to deliver on clean energy.

“Governments have lost faith in the market being able to deliver enough electricity to the right places at the right time, consumers are fuming about high power prices, and investors have been spooked by frequent and unpredictable government interventions,” Mr Wood said.

“We may be able to muddle through the next few years with the current messy mix of ad hoc and uncoordinated policies, but Australians will not forgive our political leaders if they mess up the post-coal era and fail to deliver the trifecta of clean, affordable and reliable energy.”

A spokeswoman for Energy and Climate Change Minister Chris Bowen said the government’s energy policy would deliver on a reliable renewables plan with the Capacity Investment Scheme unlocking 32 gigawatts of new capacity across Australia to 2030.

“Twenty-four coal plants totalling 26.7 gigawatts announced closure under the LNP, but for a decade they failed to deliver any policy to ensure replacement capacity – now two years after leaving office, they’re proposing a risky reactor plan that will leave Australians in the dark,” the spokeswoman said.

Opposition energy spokesman Ted O’Brien said Labor’s plan was “failing on all fronts” and the government was “trying to shut down an always on’ 24/7 power system and put all our eggs in one basket by creating a ‘sometimes on’ system reliant on intermittent energy sources backed up by technologically limited and expensive batteries”.

“Australians are paying among the most expensive electricity bills in the world and have every right to be fuming about Labor’s failing energy plan,” Mr O’Brien said. “The Coalition believes in a balanced mix of technologies including renewables and gas, with zero-emissions nuclear energy replacing coal as it exits the system.”

The report called on the government to develop an emissions reductions policy founded on more than just renewable energy targets.

“There are three priorities for planning this future market: a fit-for-purpose reliability framework, an emissions reduction policy for the energy sector ­beyond renewable electricity targets, and better integration of distributed energy resources,” it said.