“Landmark decision:” Energy bodies figure out how to put environment back into market

The Australian Energy Market Commission has opened consultation on how best to apply an emissions reduction objective into the legislation that governs the energy market in Australia, before deciding on a final guidance in September.

“We need your input,” AEMC chief Benn Barr told a large cross-section of the renewables industry at the Australian Wind Energy conference in Melbourne on Tuesday.

“This is a really landmark decision … and represents one of the most significant changes in the national energy market since its conception.

“We want your feedback on our approach. We want to use it to direct our approach to emission reductions in rule changes and reviews.”

The introduction of an emissions objective into the National Electricity Objective was agreed by state energy ministers last year after being dumped from the originally proposed legislation by the then Howard government.

In a keynote address to the conference on Tuesday, Barr said the decision to include emissions in the National Energy Law was “the most important” reform to the Australian energy market in decades – crucial to support the shift to renewable energy and to meet Australia’s climate and renewables targets.

“It brings a new dimension to the Commission’s decision making, formally integrating climate into our decision making for the first time, Barr said.

“While we’ve long recognised the critical role of emissions reduction in our work, this provides a welcome additional structure … that has the potential to make the decision making process clearer for industry and consumers, resulting in rules and regulations that can fast track the transition.”

The proposed amendments to legislation incorporate an emissions reduction objective into each of the three national energy laws – the National Electricity Law (NEL), the National Energy Retail Law (NERL) and the National Gas Law (NGL).

The Albanese government has said the amendments will provide greater clarity to Australia’s three energy market bodies — including AEMO and the AER — to consider emissions reduction in how they undertake their respective powers and functions.

The amendment is also expected to send a “clear signal” to all – including to those in the market and in politics who are still in denial – that Australia is committed to the shift to renewables and away from coal and gas.

In the absence of an environmental objective, regulators not so long ago favoured dirty diesel over an innovative clean storage option in Broken Hill, while other investments, particularly in transmission, have been overlooked because benefits coming from reduced emissions could not be considered.

“I think it’s something that the system has wanted for a very long time,” Barr told the conference. “A sense of shared ownership on where we’re going has eluded the sector for a long time.

“But we’re now talking about how we integrate energy and climate policy in Australia in a very comprehensive way.”

Barr says the legislation giving effect to the new objective is expected to pass South Australian parliament later this year.

“In the meantime, we need your input into the framework.”

Visit the project page for more information about the AEMC’s draft framework for the emissions objective.

For more information about the rule changes to ‘harmonise’ the electricity and gas rules with the emissions objective, visit the project pages here and here.