D’Ambrosio slams AEMC and Taylor for slow progress on energy reforms

Victorian energy minister Lily D’Ambrosio used her keynote speech to the 2019 All Energy Conference in Melbourne to lay the blame for slow progress in energy market reforms on both the Federal government and the Australian Energy Market Commission.

In a speech that sought to call out those standing in the way of new technologies entering the energy market, D’Ambrosio said that the AEMC had a ‘tin ear’ to the need for comprehensive reforms to the energy market rules, and labelled the Federal Government’s control over the COAG Energy Council as ‘backward’.

D’Ambrosio gave the example where the Australian Energy Market Operator (AEMO) is prevented from entering into multi-year contracts under the Reliability and Emergency Reserve Trader (RERT) function, to fill supply gaps in the energy market.

“The rules are preventing [AEMO] from reducing the risk of shortfalls or finding cost-effective solutions for procuring RERT contracts on a multiyear basis,” D’Ambrosio told the conference. “This is despite a recent review by the Australian Energy Market Commission into RERT. And it’s not the first time that the Australian Energy Market Commission has demonstrated it has a tin ear to the need for change

The AEMC has responsibility for maintaining the National Electricity Rules but oversees a burdensome process for rule changes which has been slow to facilitate the introduction of new technologies into the energy market. This has prompted some States, particularly Victoria and South Australia to go it alone on energy market reforms.

“Energy markets have effectively run on autopilot for too long. The reality is a set and forget, business as usual approach only serves to cement the current interests in our energy system at the expense of the broader community,” D’Ambrosio said.

“We have seen too slow a response to the need for rules to keep pace with the dynamic change in the industry and what consumers want now,” D’Ambrosio added. “Because of this, Victoria sought a derogation from the national electricity rules to permit AEMO to contract forward services reserves on a multi-year basis.”

Victoria is not the only state that has recognised the need for more comprehensive reforms to the operation of the energy market, with other state and territory ministers supporting calls for a review of the National Electricity Market, and how it may be restructured in light of the rapid rate of technological change underway.

Subsequently, the Energy Security Board has been tasked with undertaking a comprehensive review of the National Energy Market and to present a vision for how the market may be structured post-2025. D’Ambrosio said that this review has become necessary, as the current slow and incremental approach to rule changes is failing to deliver the best outcomes for consumers.

“Reforms are happening in the energy market too slowly and incrementally. We need a more comprehensive review of the NEM so we can address these problems in a systematic and time efficient way,” D’Ambrosio said.

“This reviewed is examining issues of fundamental importance, such as whether the ‘energy only’ design is up to the job, and whether a capacity market or strategic reserves are more appropriate.”

D’Ambrosio hit out at the Federal Government for its lack of engagement with the states on the development of energy policy, with federal energy minister Angus Taylor effectively freezing State and Territory ministers out of the conversation by refusing to convene the COAG Energy Council.

The energy council will meet on 22 November, for its first meeting in almost a year, convening in Perth. The Federal government, represented by energy minister Angus Taylor, controls both the timing and agenda for meetings of the energy council, and imposes a strong influence on the decisions of the council, including the drafting of meeting communiques.

“And as far as I’m concerned, November 22 can’t come quickly enough,” D’Ambrosio said. “It is now our first and only meeting for the year, and that is a shame. We should be having three or four meetings a year. There are too many decisions that need to be made.”

“It is the Commonwealth who decides if we meet, and when we meet, and that is absolutely a backwards approach to deal with these issues. We need to be involved in making these decisions. Most importantly, we stand ready to work with the Commonwealth when they can show the national leadership Australians are crying out for.”

The Victorian Labor government has legislated a range of targets for emissions reductions and renewable energy uptake. This includes a 50 per cent by 2030 renewable energy target and a goal for achieving zero net emissions by 2050.

Victoria has been at the centre of the ongoing debate over Australian energy policy, with the State government seeking an ambitious agenda to attract new renewable energy projects and industries into the state, while seeking to prevent a repeat of the blackouts the state suffered in January, as a result of load-shedding events that impacted a substantial number of homes and businesses.