The last federal government has left a considerable mess in the electricity sector for the incoming Labor government to clean up.
Last year the Clean Energy Investor Group commissioned research which demonstrated that barriers and risks for clean energy investment in the National Electricity Market are holding back projects and pushing up the cost of the transition by $7 billion.
Meanwhile fossil fuel generation continues to decline. Origin Energy, EnergyAustralia and AGL have brought forward the retirement dates for coal power stations in NSW and Victoria, wholesale prices are rising, and coal outages continue to increase.
In theory, these coal plant retirements and outages should pose no threat to security and reliability. If the Australian Energy Market Operator’s Integrated System Plan (ISP) and the redesign of the National Electricity Market were on track, then there would be no problem.
If the last federal government had provided steady leadership over the past nine years, Australia would have enough new clean energy generation and storage coming online to replace coal as it retires or fails.
The international and Australian investors represented by CEIG stand ready to provide the $70 billion in private sector investment required, if the conditions are right.
Unfortunately, climate and energy policy uncertainty at the federal level has undermined the energy transition, to the detriment of consumers, the economy and the environment.
As AEMO warns in its latest update to the ISP, the speed of change in the market has “outpaced” the speed at which we are planning for the upgrades needed across our transmission grid.
Australia has world-leading clean energy resources, but they will not be effectively developed if there is no credible national plan to deliver the transition. A lack of federal leadership has left Australia with an energy regulatory system that is not fit-for-purpose.
Earlier this month CEIG released the Clean Energy Investment Confidence Survey for Q3 2021-22. It showed that investor confidence continues to be degraded by the uncertain reform direction in the NEM.
The transition from coal is underway and the market bodies that oversee reform must be committed to facilitating the process at the lowest cost.
Meanwhile both Liberal and Labor states have been forced to take matters into their own hands. They have developed their own plans to manage risky coal retirements and maintain security and reliability.
CEIG welcomes the energy policies of the new Labor government. We look forward to helping implement them.
The Rewiring the Nation Corporation will invest $20 billion to deliver the ISP while keeping downward pressure on electricity prices.
Labor’s proposed reform of the regulatory investment test for transmission (RIT-T) is a significant opportunity to remove the blockages holding back the ISP by addressing the challenges in the RIT-T and accelerating the infrastructure that Australia needs.
There is also an important opportunity for Labor to address broader market and energy security risks. The new Labor government should be looking more broadly at deep reform of NEM governance to bring it into the 21st century.
Last year the CEIG published a five-point plan for resetting the NEM. This would enable Australia to deliver credible climate action and align the regulatory system with international markets.
The Clean Energy Investor Principles reforms would benefit investors, consumers and the environment. The purpose of the Investor Principles plan is to reduce risk and cost and increase innovation.
One of the key reforms required is to expand on Labor’s transmission rule change and put an environmental objective into the foundation rules of the NEM.
This would help reset the culture in the market bodies that oversee the NEM and ensure that the direction and pace of reform keeps up with climate obligations and international investor sentiment.
The energy industry had lost faith in the national process under the previous government. Secretive ‘National Cabinet’ meetings have replaced the COAG Energy Council meetings which I used to attend, and which had the confidence of stakeholders.
For three years the Energy Security Board worked on a Post 2025 redesign for the NEM that would allow coal to retire securely, but with no clear national leadership.
NSW and Victoria responded to the reform quagmire by legislating out of the national regulatory framework managed by the Australian Energy Regulator so they can directly manage the Renewable Energy Zones that will power the NEM as coal retires.
The new federal government should evaluate the adequacy of the market bodies and the governance process to deliver security, reliability and emissions reduction consistent with state policies, Labor’s own 2050 target and international market expectations.
The NSW government shows that it is possible to get multi-party agreement around the electricity transition.
Parties and independents from across the political spectrum all support the state’s Electricity Infrastructure Roadmap.
We look forward to working with all parties and independents in the federal parliament to develop good policies to make Australia a renewable energy superpower.
Simon Corbell is chair and CEO of the Clean Energy Investor Group and was Deputy Chief Minister and Minister for Climate Change and Energy of the ACT. Twitter @SimonCorbell
