Victoria says energy market rules come from different era, regulators fail to keep pace

Australia’s energy rules and regulatory system are out of date and must be reformed if there is to be any hope of adequately managing a transition to clean energy sources, with the rules been designed for a “different era”, according to Victorian energy minister Lily D’Ambrosio.

In her speech to the Australian Clean Energy Summit in Sydney, D’Ambrosio said that Australia’s energy regulators were unable to keep up with the pace of change currently occurring within the energy sector, saying that the ‘tinkering’ with electricity market rules by regulators was insufficient to keep up with the rapid change in technologies and the expectations of consumers.

“The rules of the energy market were set about 20 years ago, well before we understood the challenges, or the opportunities of a clean energy future. Part of the problem we are experiencing now is that when the rules were first set, it was almost ‘set and forget’,” D’Ambrosio said.

“The result is now that the rules are out of date, we need national institutions that are ready, willing and able to meet the needs of a 21st-century energy system.”

“The Australian public expects us to deliver. However, the rules governing the national electricity market have been deficient for too long. The simple truth is that the energy markets rules were designed for a different era.”

“For example, the RERT mechanism will need to play an increasingly prominent role in the coming years as ageing coal-fired generators become less reliable. However, the AEMC’s simple tinkering with the rules doesn’t acknowledge this,” D’Ambrosio added.

D’Ambrosio welcomed the draft demand response rule changes that are likely to win approval from energy rule-maker, the AEMC, but lamented the length of time it took for the rule changes to get to the point of implementation.

“Even when reform does emerge, it comes far too slowly. For example, demand response mechanisms like those suggested by the AEMC in their draft decision, have been on the table for 17 years. It’s no longer enough for energy rule-makers to wait for the market to respond,” D’Ambrosio said.

“It is clear we have a 20th-century electricity market for a 21st-century climate.”

“The physical grid can be enabled to cope with handle the transition to new low carbon energy sources, but it cannot cope with the policy chaos in Canberra, or rules designed for decades past,” D’Ambrosio said.

D’Ambrosio was more open to working with the Federal government, seeing its involvement as crucial to both developing an effective vision for the energy system, but also necessary for building a more effective and agile regulatory regime.

NSW energy minister, Matt Kean told the Clean Energy Summit that NSW was willing to ‘go it alone’ if the Federal government couldn’t come to the table with a workable energy policy. D’Ambrosio was due to meet Kean on Wednesday afternoon.

Any changes with the governance structures of the electricity market will require the consent and involvement of the Commonwealth energy minister, and would need to gain the agreement of the COAG energy council.

Kerry Schott, the chair of the Energy Security Board, the body that has been tasked by the COAG Energy Council to drive reform within the energy market, also stressed the importance of leadership by state governments on energy policy, during a period when the Federal government can’t ‘get its act together’.

While D”Ambrosio highlighted the initiatives that the Victorian government have introduced to support clean energy, including setting interim emissions reduction targets in line with the recommendations of an independent panel led by former federal climate change minister Greg Combet, D’Ambrosio did not address the concerns that have emerged around the design of Victoria’s Solar Homes program.

Clean energy industry advocates, and a growing number of Victorian installation companies, have raised serious concerns about the scheme’s design, which sees small batches of rebates for solar and storage released on a monthly basis, creating a monthly boom-bust cycle for the solar industry with rebate allocations being exhausted within days.