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Energy reforms increase risks for renewable investment

The Clean Energy Council is deeply concerned about a number of the reforms proposed by the Energy Security Board (ESB) in its Post-2025 Market Design Advice to Ministers. These reforms risk further undermining confidence in future investments in clean energy generation.

"The clean energy industry is particularly concerned about proposals to introduce a capacity market and change access arrangements, both of which create further risk for clean energy investors," said Clean Energy Council Chief Executive, Kane Thornton.

"A capacity market could fundamentally change and distort the energy market and price signals for new investment. This would be further compounded should such a scheme ultimately subsidise existing coal plants and unnecessarily prolong the life of fossil fuel generation that is both high emitting and increasingly unreliable.

"Any subsidy for old coal would undermine confidence in new clean energy generation critical to delivering long-term energy reliability of supply, reducing emissions and supporting economic growth.

"The case for such a profound change has not been made, particularly in light of the array of policy measures that have recently been established to ensure reliability."

While initiatives that support new investment in energy storage are welcome, the industry is deeply concerned that a capacity market would be a profound and unnecessary change to the energy market and act to funnel payments into the pockets of fossil fuel generators.

"With the Clean Energy Regulator recently reporting that 1000 days of baseload outages occurred in the second quarter of 2021, a capacity market that favours fossil fuel generators risks worsening reliability," said Thornton.

Further, the United Nations secretary-general Antonio Guterres said that the latest Intergovernmental Panel on Climate Change report "must sound a death knell for coal and fossil fuels, before they destroy our planet" and that OECD countries must phase out existing coal by 2030.

"The Federal Government should instead focus on establishing a task force to develop a plan and timeline for the closure of Australia's domestic thermal coal industry, including what criteria should be considered in setting such a timeline, and what measures are needed to support workers and communities," said Thornton.

The second proposal of concern to the clean energy industry is the Congestion Management Model (CMM).

This proposal would significantly change the nature of access to the electricity grid in a way that creates additional risk and uncertainty for investors and customers. Most disappointingly, the CMM proposal will do nothing to deliver much-needed investment in transmission that is becoming a major barrier to a reliable and clean energy system.

These unhelpful proposals come at a time where the risks and uncertainty continue to mount for clean energy investors, resulting in further stalling in rates of investment in 2021 - down 29 per cent from 2020 levels and 70 per cent on 2018.

The increasing risks and anxiety facing investors have been further compounded by the politicisation of the ESB's final report, with the Federal Government disappointingly releasing the report's details to media first. In contrast, investors remained in the dark and confidence continues to erode.

"The proposal for a capacity market and CMM will make it extremely difficult, if not impossible, to achieve the investment in new generation and energy storage necessary to deliver a low-cost, zero emissions and reliable supply of electricity for customers," said Thornton.

The ESB’s proposed reforms to system strength and a roadmap for distributed energy resources reform are welcome, and the industry looks forward to working with market bodies and governments to progress these overdue and important reforms.


For more information or to arrange an interview, contact:

Jane Aubrey
Clean Energy Council Media Manager
[email protected]
+61 409 470 683