As organisations representing the energy industry and customers, we welcome the establishment of an expert panel, to be led by Dr Alan Finkel, to review energy security and recommend a national reform blueprint for the National Electricity Market. We look forward to working with the panel to consider these important issues.
Australia is undergoing a major transition towards a lower-carbon economy that involves new technologies for generation, supply, storage, and use of energy. Recent events in South Australia underline the vital importance of energy security, and the vulnerability of our increasingly complex electricity system to natural disasters.
In this rapidly changing environment, steps intended to achieve secure, reliable, affordable and sustainable energy will inevitably come at a cost. These costs can be minimised through careful long-term planning and cooperation between all stakeholders and all levels of government. Most importantly, effective and enduring policy will ensure Australia can leverage significant commercial investment to deliver the necessary infrastructure at the lowest possible cost to consumers.
Our expectation is that this review process can ensure an objective and considered assessment of all matters relating to energy security and provide a platform for sensible policy and regulatory reform of Australia’s electricity markets.
To deliver a secure, reliable, affordable and sustainable energy system, we would encourage the panel to consider the following principles:
- Energy and climate change policies should be national, integrated and durable.
- Policies should be capable of achieving our committed emission reduction targets at the lowest possible cost, while ensuring the security and reliability of the energy system.
- A lower-emission energy system will mean a greater penetration of different types of generation and Australia’s electricity markets must be fit for purpose.
- Any changes to enhance existing regulatory frameworks should ensure clarity in institutional roles and responsibilities, and the alignment of risk allocation and incentives.
- Australia’s electricity markets must be investable across all time horizons and provide confidence that long-term investment decisions can be made which provide for adequate returns.
- Australia’s electricity system must be resilient to extreme weather events which may increase as a result of a changing climate.
- Achieving energy security is likely to require new approaches to support the integration of more diverse generation technologies. New-entrant technologies can and will need to play a role in ensuring a secure energy system and these should be assessed alongside existing technology options, not in isolation.
- Australia needs to regain its comparative energy advantage.
Given these principles we would encourage the expert panel to address the following crucial themes:
- The sufficiency of energy security in the context of recent events, the integration of diverse new generation sources and energy technologies, and forecast trends for extreme weather events.
- Improvements to the outcomes delivered by regulatory frameworks in regards to the interaction between network operation and market participants.
- Planning measures that account for market and network stability.
- Careful consideration of the extent to which solutions necessary to manage energy security at defined times of increased risk should be procured both inside and outside the National Electricity Market.
- Barriers and challenges for new-entrant technologies (such as wind, solar, storage and demand management) to contribute to ensuring a secure energy system and the benefits of addressing any barriers and challenges identified.
- Barriers and challenges for existing technologies to adapt to this rapidly changing environment so they can continue to play a vital role in ensuring a secure energy system.
- Means to encourage technological solutions that appropriately balance Australia’s needs for a secure energy system and acceptable consumer costs.
- The extent to which current governance arrangements and institutions are capable of managing and enhancing energy security in a comprehensive and integrated manner in the context of increasing change, and the nature of reforms necessary to these structures or bodies.
- Interactions with gas markets, which are expected to play a large role in influencing electricity prices and the generation mix.
- The impact rising electricity prices may have on the viability of energy-intensive industry and any consequences for electricity demand.
Our organisations welcome the opportunity to explore these crucial matters further with the panel.