Nothing fickle about Finkel

In the wash up of this weeks COAG Energy Ministers’ meeting, there is a real risk the importance of the Finkel Review of energy security will be lost.

For an issue as complex as energy market reform, the premise is remarkably simple. The existing energy market, which was created two decades ago, no longer works for our existing and known future needs.

The world is changing fast and doing nothing is not an option.

Our dirty power stations are ageing, new energy sources are coming online fast and energy demand has fallen, projected to rise again only out to 2030.

Unfortunately for all of us the Finkel review has become synonymous with the heated debate about a carbon price and an emissions intensity scheme.

Those issues are important, but the Review of Energy Security in the National Electricity Market, led by Chief Scientist Dr Allan Finkel, is not a one dimensional assessment of Australia’s energy future.

The review recognises “a unique opportunity to undertake a whole-of-system review” of the National Electricity Market, and its Terms of Reference require the Review to deliver a “blueprint” for Australia’s future energy market.

How do you make spending decisions if you don’t know where you are going?

Technology is changing rapidly.  With solar and battery storage, consumers are becoming market participants.

Grids need to be built with increased redundancy, greater interconnection, and to maximise the use of the current asset.

The days of massive, polluting coal-fired power stations located hundreds of kilometres from major population centres will soon be over.

That is why looking ahead to see what Australia’s energy system should look like in just over one decade’s time, and developing a blueprint to get there is so important.

Finkel’s preliminary report, released on 9 December, was really just an issues paper but the unreasonable knee-jerk response to it shows how far we have to go to have a mature debate in this country.

The Finance Minister, Senator Mathias Cormann, politicised the review from the get go, refusing to express confidence in Dr Finkel after he made the obvious point that existing policy settings were insufficient to meet Australia’s international climate change commitments.

With lightning speed, the internal politics of the Coalition meant the debate was canned even before it had begun.

An emissions intensity scheme, a rational and effective economic lever, and one that all major players agreed on, was taken off the table.

This idea was so dangerous it was rejected before it had been proposed.

Surely we can use the summer break to step back from the day-to-day politics and allow some reflection on how to build a smarter energy system.

A smart energy system puts consumers at the centre. It takes account of climate change, both reducing emissions and standing up to a more fraught and demanding climate.

A smart energy system has a diverse energy mix, encourages distributed generation, values energy efficiency, builds greater connectives and density to facilitate the energy system of the future.

The rules need to be modernized.  The National Energy Market must put consumers at the centre and make climate change mitigation a key priority.

In building a blueprint of where we need to head, the Finkel Review must deal with the fact that our major power stations are very old and there must be a transition strategy to close and replace them before 2030.

It must also acknowledge Australia has made an international commitment to help keep global temperature rises to less than 2 degrees.  A modern electricity market must do its fair share of the work in reducing Australia’s emissions.

The future means new business models and technology that will simply make crude, one-way energy from a coal-fired power station redundant.

The future is instead sophisticated and multi-directional.

The internet of energy will allow consumers to trade directly with their neighbours and for communities to aggregate their energy supplies through new or existing energy companies.

Doing nothing has a cost.  And it is substantial.

Locking in the status quo hurts competition and ultimately consumers.

It retards the opportunities technology and efficiency offer us.  It locks in the incumbents as the winners of the game, at the expense of the public.

And ultimately it will come at a political cost no political party can withstand.

So let’s not throw out the baby with the bathwater.   As the Finkel Review notes, Australia is not alone in grappling with these issues.

If we can develop a rigorous blueprint, other nations will want to learn from our experience and that presents its own economic opportunities.

Australia is at the forefront of solar and battery storage and smart energy research and development and commercialisation.

Our energy industry is full of smart people and smart companies that are building the energy system of the future.

There is now a once in a generation opportunity through the Finkel Review to harness these smarts and outline a blueprint for a future national electricity market.