The Australian energy sector is in crisis. After a decade of policy instability, there has been underinvestment in new electricity generation. As ageing electricity generation continues to close, power prices are rising and energy security is at risk.
Australia needs bipartisan and long-term energy policy to accelerate private sector investment in new forms of electricity generation.
The Chief Scientist has given Australia a roadmap – the Finkel Review – that can modernise the energy sector and ensure private investors have the confidence to build the much needed new generation we need to drive down power prices and secure our energy supply.
The Finkel Review includes 50 recommendations, 49 of which have already been endorsed by the Australian Government as well as the COAG Energy Council. Their implementation will deliver a more contemporary and appropriate regulatory, governance and market framework to support the future energy system.
However, these reforms will be meaningless without a Clean Energy Target (CET). This technology-neutral policy can deliver the lowest cost and most efficient form of new generation.
While the cost of new energy generation – such as large-scale wind and solar farms – continues to fall, investors in new energy generation face substantial risks which can only be offset by a CET (or similar policy). New energy investment is capital-intensive, long-lived and is competing in cost with traditional generation that was overwhelmingly built, owned and operated by governments. A CET can give private investors the confidence that their investment will be viable in the face of these challenges and the continued substantial uncertainty occurring in the energy sector.
The bipartisan support for the 2020 Renewable Energy Target currently provides this confidence, and has resulted in over 40 projects worth $8 billion under construction throughout rural and regional Australia, delivering over 4000 MW of new generation capacity and more than 4000 jobs.
This unprecedented level of new investment is not nearly enough to replace the ageing coal generation that is continuing to close over coming decades. And it will stall before 2020 unless future policy certainty is established with bipartisan political support.
The Finkel Review must be adopted as a complete package and we urge the Australian Government to support a Clean Energy Target that will provide investment confidence for much needed new electricity generation. Only new investment can drive down power prices and improve reliability.