Time to return to national energy and climate policy

18 July 2016

The transformation of Australia’s energy system to a low carbon future needs to be driven by an integrated national policy process rather than state-based targets and intrusive regulation, the energy industry said today.

Australian Energy Council Chief Executive, Matthew Warren, said the challenges of integrating large-scale renewables in South Australia had been exacerbated by the use of schemes designed only to meet arbitrary targets rather than deliver an efficient and reliable transformation.

“South Australia has become a giant experiment in the impacts of integrating intermittent renewables like solar and wind into a conventional grid,” Mr Warren said.

“The schemes supporting this world-leading experiment have no consideration for the viability of the grid or impacts on the market. They are just about meeting targets.

“The effect of this has been to override conventional price signals that operate in our electricity market, that tell owners and developers of both thermal and renewable generation where and when to build.

“There is an understandable political response to these emerging issues that seeks to directly intervene in commercial decisions about whether to run plant or not, or to constrain investment decisions by introducing new regulations on particular technologies. But this type of intervention risks undermining investor confidence and could inhibit future investment in back-up capacity.”

Mr Warren said that South Australian consumers faced not only a sustained re-set to higher prices, but also increased risks from potential future gas scarcity in south-eastern Australia, reduced flows of back-up electricity from Victoria because of state-based schemes there, and increased reliability risks at periods of high and low demand.

“We created the National Electricity Market in the 1990s to improve the efficiency and operation of state-based grids. It has worked well. It doesn’t help if each state now sets energy policies that ignore the national market.

“It’s like ignoring the advice of experts. Just because the solutions developed at a national level may not be as popular, doesn’t mean they aren’t the most sustainable and best way forwards.”

About the Australian Energy Council

The Council represents 22 major electricity and downstream natural gas businesses operating in competitive wholesale and retail energy markets. These businesses collectively generate the overwhelming majority of electricity in Australia and sell gas and electricity to over 10 million homes and businesses.

Media contact             Carl Kitchen                0401 69134