State and federal energy ministers were in a celebratory mood on Friday, hailing the most productive and consequential meeting that any of them can remember. And the relief felt throughout the industry was immense too. “It’s a complete reset,” said one industry leader. “It’s transformational,” said another.
The three big decisions taken at Friday’s lengthy meeting in Canberra reflect both the urgency to act and the frustration of a “lost decade” under the Coalition government, and they provide renewed hope that Australia’s green energy transition can, in fact, match the science rather than incumbent business plans.
Key among them, as we flagged a week earlier and reported last Friday, is the decision to put environment and emissions reduction into the National Electricity Objective, more than two decades after it was dropped by the Howard government under pressure from the fossil fuel lobby.
This is a critically important move because it sweeps away the sham of the Coalition’s “technology neutral” approach – a complete nonsense if the goal is to cut emissions – and it will avoid a repeat of some of the frankly crazy decisions made by regulators and rule makers when the environment is ignored.
Federal energy minister Chris Bowen pointed to one of them on Sunday, the proposed replacement of two ageing diesel generators in Broken Hill with more diesel generators rather than storage, which he described as “bizarre, ridiculous …. silly and perverse.”
But the impacts went far beyond that and the lack on an environmental objective in key regulatory decisions hamstrung billion-dollar investments in transmission lines and other infrastructure.
“Finally they (the regulators and the rule makers) will accept the reality of climate …. so it is a big difference,” Bowen told the ABC Insiders program. “We’re sending a message to the world that we are open for investment, in renewables, in transmissions and storage.”
The other important decisions were to dump coal from whatever emerges as part of a “capacity mechanism”, and to regain control of the market re-design from the Energy Security Board, which appeared intent on waging legacy industry battles long since abandoned by most of the market.
State ministers have been frustrated by the positions taken by the ESB – under the tutelage of former federal energy minister Angus Taylor – on key reforms such as capacity markets and congestion management. And they were keen to celebrate on Friday.
“Today’s meeting was a resounding success for Victorians, and shows what’s possible now that we have a Commonwealth government that actually wants to support energy transition and urgent emissions reductions,” tweeted Lily d’Ambrosio, the Victorian energy minister and the longest continuing serving state minister.
Tom Koutsantonis, who first became South Australia energy minister in 2011, and worked with the Rudd/Gillard, Abbott and Turnbull governments before being relegated to the Opposition by four years of state Coalition government, agreed:
“In one meeting, Chris Bowen has done more to help progress climate and energy action than the Abbott/Turnbull/Morrison governments combined.”
And that sentiment was echoed by the Smart Enegy Council, the Canberra based lobby group known for its feisty opposition to the Coalition regime. “This was the best energy minister’s meeting for a decade from a climate and renewables perspective,” it tweeted.
Away from the euphoric response, some key questions remain. If the ESB has lost carriage of the market design, then exactly who does have it? Many in the market distrusted the ESB’s entrenched positions, but they are keen to see more transparency if the decisions go back to ministers and their advisors and bureaucrats.
There is still no clarity yet for investors, particularly those queuing up to invest in storage projects. There are calls for mechanisms such as storage targets, an extension of the Retailer Reliability Obligation, or a deeper operating reserve, but no indication on where the ministers sit with this.
There is also uncertainty about the way forward on congestion management, which seeks to unravel the riddle of providing enough network infrastructure, and who pays for it, and who can build what and where.
And it seems inevitable that existing coal generators – having being excluded from any capacity mechanism per se – will end up with some sort of payment to guarantee supply as the states seek to bring some co-ordination and certainty to the timing of their closure.
The Victorian Greens, for instance, are calling for all the state’s remaining coal generators to close by 2030. The question might be better asked, how to ensure they stay in the market that long?
Payments will likely be necessary to provide certainty around coal closures, so the market can ensure that enough new capacity is built before the coal generators close.
But no-one – outside of the coal industry itself – wants to see a repeat of the secretive deal cut between the Victorian government and EnergyAustralia over the closure of Yallourn.
“We haven’t made any final decisions,” Bowen said on Sunday, noting the decision to support industry pleas and split the two questions about coal exits and providing incentives to new capacity.
So while key questions remain, and there are many details to be sorted, the industry is pleased that it now appears to be on the right path, with environment back into the NIO, a climate target about to become law, and energy policy back into the hands of ministers, providing unity of purpose and clarity about the objective.
“This is a real re-set,” says Kane Thornton, the head of the Clean Energy Council. “It’s quite foundational … we are now finally having the right discussion about achieving the energy transition.”
Thornton described it as a watershed moment after years of neglect. “Today, we’re seeing a clean, green light for low-cost renewable energy from hydro, solar, wind and storage to become the dominant source of Australia’s energy needs through an orderly transition away from costly, dirty and failing fossil fuel sources.”
Simon Corbell, the head of the Clean Energy Investors Group, and a vocal critic of the ESB’s approach to capacity markets and congestion management, said the ministers’ decision to put themselves at the centre of market design was welcome, and a significant rebuttal to the work of the ESB.
“There was a clear disconnect between the work of the ESB and the views of ministers, particularly the states, for a number of years.
“The ESB pursued its own particular view of how the market should be designed, and is was out of sync with the rest of the industry. The ministers have said ‘enough is enough’ and have deced to design it themselves.
“That creates a better opportunity for better alignment of what the industry is calling for, which is incentivising new investment and doing it in a timely way. The ESB failed to deliver either of those.”
Shane Rattenbury, the successor to Corbell as energy and emissions reductions minister for the ACT government, said the changes made on Friday were fundamental to the rules that shape the electricity market.
“By making emissions reduction one of the key objectives in the NEO, we’ve empowered market bodies and other actors to make rules and regulatory decisions that facilitate an orderly transition to a 100% renewable and zero emissions future,” he said.
