Australia’s electricity market is no longer working and needs substantial reform.

The Australian Solar Council and Energy Storage Council have called on all Energy Ministers to implement a 6 point plan to reform Australia’s electricity market.

Brief for COAG Energy Council

Australia’s electricity market is no longer working and needs substantial reform.

COAG Energy Ministers have a critical role to play in what the Finkel Review has called a “once in a generation opportunity to reform the national electricity market”.

The Australian Solar Council and Energy Storage Council call on all Energy Ministers to implement the following key measures:

  • Establish a plan for the orderly closure of coal-fired power stations;
  • Make action on climate change a key objective of the National Electricity Market;
  • Commit to at least 50 per cent renewables by 2030;
  • Introduce a 5-minute settlement rule;
  • Enable markets in peer to peer trading and demand response; and
  • Replace the Australian Energy Regulator and Australian Energy Market Commission with a new combined energy rule maker and regulator.

Context

The energy market is changing rapidly and will be completely transformed within the next decade by the combination of distributed and large-scale solar, energy storage, demand response, energy efficiency and smart energy management systems, which have the potential to put the consumer at the centre of the energy system.

Australia is unprepared for the energy transformation that is about to occur. That is why the Finkel Review – an independent analysis of the National Electricity Market – is so important.

The energy system as a whole, not just the electricity sector, will see greater change in the next 10 to 15 years than it has in the last 100.

Australian Solar Council, Energy Storage Council

 The Australian Solar Council is the peak body for the solar industry, with more than 1,000 members comprising residential, commercial and large-scale solar companies, academics and concerned Australians. Members also include manufacturers, distributors, retailers and installers and cover solar PV, solar hot water and large-scale solar thermal.

The Energy Storage Council is the peak body for the energy storage industry, with more than 150 members. Our members include manufacturers, distributors, retailers and installers and cover all forms of energy storage and battery storage.

Increasingly, our members are focusing on smart energy – the convergence of solar and energy storage with smart energy management systems, which will revolutionise Australia’s energy system.

Orderly closure of coal-fired power stations

Australia’s power assets are at the end of their economic and commercial operating life and there needs to be a transition strategy up to 2030, which needs to begin now.

Investments and planning decisions on major electricity assets made in the coming three to five years are for the next 30-40 years and longer.

Governments must commit to and adopt a process for the orderly closure of coal-fired power stations.

We support the model from the ANU’s Centre for Climate Economics & Policy (CEEP),[1] which offers a market-based mechanism to achieve closures. However, we would support other models were they as clear and effective

Making climate action a central objective of the National Electricity Market

Electricity remains the number one contributor to greenhouse gas emissions in Australia. The electricity sector must, therefore, lead the way in reducing Australia’s greenhouse gas emissions.

The National Electricity Market rules should be amended to ensure they are consistent with Australia’s international climate change commitments.

This can be achieved through an amendment to the National Electricity Objective (NEO) to include climate change and environmental factors as previously submitted to Energy Ministers by the ACT and other Governments.

50 per cent renewables

Most Australian jurisdictions now have strong renewable energy targets for electricity supply:

  • The ACT will deliver 100 per cent renewables by 2020;
  • South Australia achieved 50 per cent renewables in 2017;
  • Queensland’s target is 50 per cent renewables by 2030;
  • The Northern Territory’s target is 50 per cent renewables by 2030;
  • Victoria’s target is 40 per cent renewables by 2025.
  • South Australia will deliver 50 per cent renewables by 2025.

The Australian Solar Council and Energy Storage Council call on all Australian Governments to support at least 50 per cent renewables by 2030.

A national commitment to generate at least 50 per cent of Australia’s electricity from renewable energy can be achieved through a range of measures, including:

  • The current Renewable Energy Target, which closes to new entrants in 2020;
  • The inclusion of pre-existing renewable energy projects;
  • A carbon price of some form;
  • Projects developed by the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC);
  • Action by State and Territory Governments, including reverse auctions for large-scale renewable energy projects;
  • The rapid uptake of energy storage at residential, commercial and industrial scale;
  • The implementation of energy efficiency measures; and the
  • Introduction of emissions standards and the closure of ageing and redundant coal-fired power stations and emissions intensive facilities.

5-minute rule

We support an immediate rule change by energy market agencies to reduce the settlement period for the wholesale energy market from 30 minutes to 5 minutes. This would align the settlement and bidding processes and provide an appropriate incentive for energy storage and provide greater stability to the energy system.

We agree with the former CEO of the Clean Energy Finance Corporation, Oliver Yates, that “five-minute interval pricing, from our own analysis on battery projects, would change the revenue profile significantly and would then encourage batteries to come into the market and be available for short-term supply.”[2]

Peer to peer trading and demand response

The National Electricity Market should be reformed to allow for increased participation of consumers in direct energy transactions using peer-to-peer or aggregated services providers.

Governments should review the rules of the National Electricity Market and the operations of regulators and utilities to ensure they do not prevent peer to peer trading.

Governments should work together to establish standardised processes for peer to peer trading.

The rules should also be amended to allow the development of markets for demand response – beyond the ancillary services proposal from the Australian Energy Market Operator (AEMO)[3]. Changes in this area will drive more diverse participation and encourage faster transformation to a multi-path distributed energy network and bring lower costs.

We would also welcome the establishment of additional energy efficiency market tools.

A new energy market rule maker and regulator

Governance arrangements for the National Electricity Market are extraordinarily complex, with a number of non-elected, non-transparent bodies managing the rules of the NEM. These governance arrangements need to be streamlined, with the roles of the  Australian Energy Regulator and the Australian Energy Market Commission (as rule maker) combined. Australia is the only jurisdiction in the world where these two energy market functions sit in separate bodies. The new body should be led by someone who understands the extraordinary transformation that the electricity sector is going through globally and in Australia.

Consideration should be given to establishing an independent advisory body –  a permanent Finkel Review – to monitor the implementation of the recommendations of the Finkel Review and to provide ongoing advice to all governments on national energy market reform.

 

John Grimes

Chief Executive

Australian Solar Council, Energy Storage Council

2 June 2017

[1] https://ccep.crawford.anu.edu.au/department-news/7022/phasing-out-emissions-intensive-power-stations AND https://ccep.crawford.anu.edu.au/sites/default/files/publication/ccep_crawford_anu_edu_au/2015-11/ccep1510.pdf

[2] http://reneweconomy.com.au/battery-storage-decision-crucial-rule-change-delayed-10039/?utm_source=RE+Daily+Newsletter&utm_campaign=b138279020-EMAIL_CAMPAIGN_2017_02_27&utm_medium=email&utm_term=0_46a1943223-b138279020-32130757

[3] https://www.aemo.com.au/-/media/Files/PDF/Guide-to-Ancillary-Services-in-the-National-Electricity-Market.pdf

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