State and federal energy ministers have agreed to put emissions into the objectives of the National Electricity Market, in a landmark move that is expected to smooth the way for Australia’s rapid transition from a coal dominated grid to renewables.
The lack of an environmental objective had hamstrung regulatory decisions, investments and rule making since it was dropped from the rules of the newly created market in the late 1990s. Its approval was one of a number of key decisions made by ministers at a meeting in Canberra on Friday.
“This might not sound much but this is the first change to the national energy objectives in 15 years,” federal climate and energy minister Chris Bowen told reporters after the meeting.
The state and federal ministers also appear to have taken heed of the near unanimous rejection of the Energy Security Board’s proposed capacity mechanism, and admitted it will not be ready by the end of this year, as previously planned.
They said in their communique that they will take “more active control” of the work that had previously been handed to the ESB under former minister Angus Taylor. They said this will this “ensure firming capacity is in place as the system evolves, and the best means to manage the risks of disorderly exit of coal generation.
The ESB proposal was rejected – not because a capacity market is not needed (although there are disagreements on that point) – but because of its structure, which sought to include coal into a market incentive that should be designed to attract new technologies.
The ministerial communique appears to accept the advice of the industry, and will look to split the two issues – coal closures and new technologies.
Bowen told journalists the ministers still wanted it to happen as quickly as possible, but clearly needed more time to consider their options and any revised proposals.
“The plans we inherited had it happening in 2025. It can happen more quickly, that’s great, but we’ve got a very big push,” Bowen said. “We need a capacity and firming mechanism to ensure that the transition is orderly.
The inclusion of an environmental objective into the NEO was welcomed by climate and energy experts.
“For too long, the NEO has allowed industry and regulators to ignore the impacts of electricity sector greenhouse gas emissions, enabling investment in polluting technologies like coal and gas, which have driven up emissions as well as electricity prices,” “said the Climate Council’s Andrew Stock.
“This legislation paves the way for low cost, low emissions energy sources — renewable energy like wind and solar — to play a greater role in Australia’s energy system,” Stock said.
“Now, all states and territories must ensure this legislation gets passed. Climate science makes clear efforts by the fossil fuel industry to block initiatives like this are way out of time.”
Tim Buckley, senior energy market analyst and director of Climate Energy Finance, said that in the absence of the obvious best solution – a price on carbon – the change to the NEO would provide a simple and unambiguous objective, aligned with Australia’s new climate ambitions, that maximises domestic energy security.
“The destination is now clear – a decarbonised, stable and low-cost energy system built firmed renewable energy that resolves and avoids the recurring energy crisis evident today,” Buckley said.
