Coalition rejects proposal to factor environment into electricity market rules

The federal government has rejected a recommendation from a Senate committee that National Electricity Market laws should include an environmental objective, to keep Australia’s grid more closely aligned with its Paris climate commitments and national efforts to cut power sector emissions.

The recommendation, made by the Australian Greens as part of a federal government inquiry into the performance and management of electricity network, was aimed at addressing community concerns about rising electricity prices and the reasons behind them.

Labor has also promised a review into the National Electricity Market and its “objectives”, and wants environment to be included. Without it, Labor climate spokesman Mark Butler said earlier this week, the market is not fit for purpose and has no signal to decarbonise.

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“Australia’s renewable energy industry is set against a background of an electricity sector that is confronting profound challenges across a range of different fronts,” Butler said in a speech to the Sydney Environment Institute in March.

“There is a pressing need to start a very difficult process of decarbonising our electricity sector. But the most basic rules of the National Electricity Market don’t reflect that imperative at all. The National Electricity Objective, the law and the market rules are all based exclusively on the reliability of electricity and affordability; they say nothing about the third pillar of modern electricity policy which is carbon. The implementation of policies directed at decarbonisation, like for example the renewable energy target, end up feeling like trying to bang a square peg into a round hole.”

Likewise, the Senate committee said that factoring the environment into the objectives of the NEM would inform rule making and coordinate Australia’s efforts to reduce emissions in the electricity sector at the same time as guaranteeing a secure supply of electricity in an affordable way.

But the Coalition rejected the idea, arguing that the NEM’s current objective – “to promote efficient investment in and operation of electricity services for the long-term interests of consumers” – was good enough.

“The Australian government believes that the objective as defined remains appropriate to current and future policy needs and provides a robust basis for market regulation and development,” it said.

The government also said that making changes to the objective would “risk introducing unnecessary complexity and potential confusion for the market operator, the regulator and participants.”

But to many, like energy economist Bruce Mountain, the NEM is already extraordinarily complex and in dire need of reform – particularly in light of the ever more pressing need to shift it away from coal-fired generation and towards renewables.

“When I say: “Trying to understand the NEM,” I mean it as both a verb and a noun: We’re trying, and it is trying,” Mountain told the Solar and Energy Storage Conference in Melbourne on Thursday.

And many have argued, like former Greens leader Christine Milne, that the NEM can only be fixed with rule changes that bring it in line with the global climate pact and increasingly cheap and efficient renewable energy technology.

“It’s not a federal election issue, in that the community finds it really hard to understand,” Milne told the same conference on Thursday. “But (the NEM)… frankly is broken, it needs a mega change to the national electricity market, and that is something that we need to pursue.

“We know what needs to happen and we have to get on with it.”

Even in the electricity industry, major players like AGL Energy are recognising the need for change.

AGL managing director Andrew Vesey told the 3rd Emissions Reduction Summit in Melbourne this week that, with the right policies, the clean energy transformation in the power sector could happen “almost overnight.”

“If you get (the policy settings) right, it will happen really quickly. It’s not going to be 30 years. And I think that when you get it right you will be looking in the rear view mirror at these targets,” he said.


As Giles Parkinson wrote here on Thursday, one of the biggest roadblocks to NEM policy reform “appears to be the mentality of the energy policy makers, hiding behind… rules that do not even mention the environment, let alone decarbonisation.

“If that is changed, as Labor proposes, that could clear the way for the type of tariff reform that could actually encourage the investments in new technologies, distributed generation and different business models – many of which are stranded by greed of the incumbents and the backward vision of the regulators.”

Comments

9 responses to “Coalition rejects proposal to factor environment into electricity market rules”

  1. john Avatar
    john

    The point of contention is that the real effects of producing power should be taken into account.
    On the one hand we have a very high GHG producer and on the other we have low GHG producer should they be treated the same?
    What we are talking about is the externality cost to society.
    In a real accounting for the cost of any enterprise this has to be taken into consideration.
    Other wise we use the method that says this is what it costs and i do not care about the consequences which is totally unsocial and counterproductive in the long run for society there has too much emphases on me now and not enough about you and them tomorrow in the way society has evolved.
    So emphatically we have to take into account the externality cost of production.

    1. MaxG Avatar
      MaxG

      Gees, this is revolutionary thinking! Not happening as long as neoliberals rule the world. I mean, the profits would be going south — we can’t have that! 🙂

      1. john Avatar
        john

        Max i honestly hope that is not how people think.
        Profits do not have to go south companies just have to adapt and do some forward thinking.
        It is not hard as you know hire some people who have education and can bring the company up to speed this is not rocket science.

        1. MaxG Avatar
          MaxG

          Hope seems to be an elusive thing 🙂
          Reality is different; externalising cost is a neoliberal notion, and all their followers do seem to validate this approach.
          Thinking alone will not solve it; you just said “hire” = reduction in profit; repairing a mine site = reduction in profit; not destroying the environment = reduction in profit; unable to globally trade making use of low-cost labour = reduction in profit… and I could go on.
          Sorry, John :o)

      2. Cooma Doug Avatar
        Cooma Doug

        The original market design included price node factors that take into account the pollution rating of generators.
        It was knocked on the head back in the mid 90s.
        The constraint calcs that function in real time on the market, take into account all issues affecting system security and capabilities in all aspects of generation and load.
        I dont believe that adding market factors for pollution is difficult in a process that is already huge, successful and a magnificient example of modern industrial innovation.

  2. howardpatr Avatar
    howardpatr

    Would you really expect anything different from Cayman Turnbull, Hunt and the LNP.

    Environmental vandals dating back, in Cayman Turnbull’s time, to his clear felling of forests on the Solomon Islands.

    Hopefully enough voters will remember climate change and Cayman Turnbull’s duplicitous behavior on 2 July.

  3. onesecond Avatar
    onesecond

    What psychopaths these Coalition cronies are. Newsflash: The environment is not some fancy luxury on the side, it is a must run option.

    1. nakedChimp Avatar
      nakedChimp

      They believe in infinite growth, they also believe in infinite natural resources.
      Funny thing though, that they make profits from cornering markets mostly, ie. reducing abundance and making stuff rare.
      They just haven’t found out yet how they can make finite natural resources scarce so they can profit from.. wait a second..

  4. MaxG Avatar
    MaxG

    A party that can only utter three word slogans, like the LNP, is certainly overwhelmed to factor health and environment into the equation. These are the very things which are cut (see latest budget), so why would they include this in any assessment / policy, etc.?

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