Coal

Zibelman: We can’t just keep whinging about the state of energy policy

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Outgoing CEO of the Australian Energy Market Operator, Audrey Zibelman, has sent a message to Australia’s energy policymakers, saying that Australia could no longer afford to continue to ‘whinge’ about the status of energy policy.

The speech given to the AFR Energy Summit on Monday is somewhat of a parting shot at Australian policymakers and will be one of Zibelman’s last public addresses as the head of AEMO, before taking on a new leadership role at Google’s X initiative. Zibelman said that the time had come to make a decision to reform the national energy market or to accept that States would need to go it alone.

“We are at an inflection point at this industry,” Zibelman told the summit. “We need to either reform the market and regulations to allow for efficient market responses or decide that we can’t and that we need to go towards a more regulated and local market.”

“What we can’t afford to do anymore, is not make a decision and continue to whinge to each other about not making a decision. The energy security board has developed a plan that we intend to present to the ministers over the next couple of months.”

Zibelman told the summit that the investment dynamics in the Australian electricity market had fundamentally changed and indicated that the Energy Security Board almost ready to deliver a series of recommendations for energy market reforms.

“We’ve worked closely with industry, and all that really is left now to articulate the recommendations and get both industry leadership as well as government support to take it forward,” Zibelman said.

Zibelman said t it was clear that coal will have a diminishing role in the energy market, and that it will primarily be batteries and gas generators that will compete to provide the support services in a future energy system powered primarily by wind and solar.

“The question with respect to domestic gas is that it will compete with batteries and it’ll be an issue in terms of the price of natural gas,” Zibelman said. “The issue is going forward with respect to gas versus batteries is that we will need fast responding resources to be able to complement the renewables, and gas and batteries work well.”

“Recognising we need all of it, the issue with coal going forward will be the capability of coal to flex. There’s some levels of investment we can make to make them more dispatchable, but it is difficult for those generators to go up and down rapidly without having further deterioration. Hence, most people when they’re looking at the future of a flexible grid are really thinking about gas and batteries as opposed to coal.”

The recommendations of the Energy Security Board are set to include the creation of a new mechanism to incentivise investment in electricity infrastructure that can deliver firming support to complement wind and solar generation.

“The biggest thing that I think we have to recognise is that when we used to build generation, historically, it was always because demand was increasing,” Zibelman said.

“What’s happening now is that with wind and solar, the price of energy itself is going down. And it should, because you’re looking at resources that have virtually no fuel costs. What we need to do is make sure that when people are investing in the firming resources, they know that they can get a fair price and they can invest with confidence.”

“It is going to be helpful to have a single mechanism that we can use across the national energy market. Otherwise, we have to make a decision to say, ‘well, we won’t have a national energy market, we’ll have five state markets’.”

During Zibelman’s tenure at the head of Australia’s primary energy system operator, a position held since her appointment in 2017, the market has undergone a significant transformation – with wind and solar technologies entrenching themselves as the cheapest sources of power and battery technologies emerging as an essential part of the future energy system.

“We’ve also learned to accept that when two-thirds of our coal plants retire as they’re expected to do over the next 20 years, their economic replacement will be a combination of wind and solar, along with firming capabilities. A combination of storage and natural gas, depending on price,” Zibelman said.

“We’ve developed plans, and these plans have been accepted, to build out the power system the grid so that we can integrate these resources and get the advantage of these free electrons.”

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