John Pierce Chairman n Energy Market Commission appeared before a Senate energy security committee at Parliament House in Canberra on Friday 10 February 2017. Photo: Andrew Meares Photo: Andrew MearesThe federal government has been warned the paralysis confronting energy policy risks exacerbating supply reliability while pushing power prices higher.
In its submission to the Finkel review of the energy sector, the overseer of the country’s energy markets, The n Energy Markets Commission, pointed to the UK as a “cautionary tale” demonstrating how incompatible policy mechanisms aimed at reducing carbon emissions while ignoring the risks that emerge has both hurt energy reliability and increased prices.
“International evidence suggests emissions reduction policy needs to be implemented in ways that support investment in and operation of the power sector with effective competition,” the AEMC noted in its submission. “Otherwise consumers bear the costs of investment risk and ongoing government and regulatory intervention is triggered.”
Its comments came as the head of one of the country’s dominant energy utilities, Frank Calabria, the chief executive of Origin Energy, reiterated the energy sector’s support for putting a price on carbon because this would have the lowest effect on electricity prices and also industry competitiveness, by promoting the winding down of high-emission coal-fired power generation while providing an incentive for further investment in renewable energy sources.
“Origin joins a growing chorus of companies calling for the government to put an emissions intensity scheme for the electricity sector back on the table,” Mr Calabria said. “Of course, this is not the only solution – but we believe it to be the lowest cost.
“Why travel down the path of ‘next best’ solutions which will only drive up the cost of carbon abatement.”
The chairman of the AEMC, a former secretary of the NSW Treasury, John Pierce, said the overall aim of the national electricity market was to provide a reliable, secure energy supply at the best price for consumers.
“It must continue to do that while the sector transforms to meet the emission reduction policy objectives of governments,” he said.
“Without clear, national, co-ordinated policy objectives and credible mechanisms that reinforce one another both business and consumers find it difficult to invest – which undermines the reliability of supply.”
The energy sector has suffered from “a long vacuum around national, co-ordinated policy decisions”, Mr Pierce said.
The calls follow a period of unprecedented power disruptions to South and ahead of the closure of the Hazelwood power station in Victoria at the end of the month, which will remove as much as quarter of that state’s generation capacity, while also slashing the state’s carbon emissions, with fears that it, too, will face supply disruptions.
That closure, together with rising wholesale electricity and gas prices, has seen many large industrial users of electricity and gas face steep hikes to their electricity bills over the next few years leading to many employers warning of job losses as they move jobs overseas.
The AEMC submission comes after the finalisation of a range of technical measures to be incorporated into the energy markets that may help ease some of the short-term supply pressures and help to boost reliability.
Mr Calabria also said that during periods of strong domestic gas demand, which typically occurs during winter, there is the opportunity for the Queensland gas export projects to divert supplies to the domestic market, saying that this had occurred last winter.Continue Reading →