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The Morrison government appears to be inching closer to committing to net zero emissions by 2050 as it comes under growing international pressure over climate policy, a top energy adviser has said.
Kerry Schott, head of the government’s Energy Security Board (ESB), called for national unity on energy policy after the body published a new report citing differences among Australian governments as a “challenge” to the national electricity market.
With 60% of Australia’s coal-fired power stations tipped to close within the next two decades, Schott also said investors in large-scale renewables projects needed certainty they would not suffer congestion when they connected to the power grid.
Australia’s electricity system has been heavily reliant on coal. The ageing fleet, with a large influx of solar and wind power and a fractured climate policy framework, has presented the electricity market with a major headache.
State, territory and federal ministers will this year consider reforms proposed by the ESB to ensure the exit of coal-fired power plants occurs in an orderly manner.
Experts say the national electricity market needs to be “fit for purpose” for a future in which power generation is more decentralised and rooftop solar even more prevalent.
But in an accompanying paper on the health of the national electricity market, the ESB said the transition “would be less difficult if there was an agreed national emissions reduction trajectory” among the nation’s energy ministers.
Asked whether she would support the federal government endorsing net zero by 2050 so that everyone was on the same page, Schott said: “Yes, I would.”
Schott added: “But it’s interesting, isn’t it? Because I think the federal government’s under international pressure about its emissions target overall, not just the electricity sector … They’re softening their language and clearly, you know, moving in that direction without actually saying so.”
The Morrison government says it is committed to net zero in the second half of the century, and while it has never explicitly ruled out a 2050 target, it has argued it won’t do so without spelling out the costs.
Political pressure has mounted as an increasing number of Australia’s trading partners including Japan, South Korea and the European Union, have embraced the goal, while China has set 2060 as its goal.
After the US presidential election – when Joe Biden prevailed with a platform that included returning the country to the Paris agreement and setting the nation on a course to net zero by 2050, Scott Morrison said he aspired to get there “as quickly as possible”. The prime minister was rebuffed from speaking at a recent climate ambition summit.
The ESB paper notes all of the states and territories in the national electricity market have backed net zero by 2050.
“What is not agreed among these jurisdictions is the trajectory to reach their targets and as each state and territory pursues its own target out to 2030 and beyond to 2050, governance of NEM operations is an ongoing challenge,” the report says.
Schott said the states were “all going at different speeds” but needed “to recognise that the policies that they’re doing on their own are actually having an impact across the whole national electricity market”.
She said NSW’s electricity infrastructure roadmap was relatively recent, but Victoria and Queensland “have been going flat out on renewables” and that had an impact on neighbouring states. Schott called for better coordination among the jurisdictions.
Schott also said investors in large-scale renewable energy needed confidence that they would not “spend a few hundred million putting in a generator and then you find you can’t dispatch your power because the grid is congested”.
The ESB report spells out priorities for post-2025 reforms, including ensuring reliable supply during the energy transition, better managing demand, and ensuring renewables link in with the network.
Schott was upbeat about the opportunities the transition offered to ordinary energy consumers, saying the uptake of rooftop solar was spawning a decentralisation of power generation.
“Consumers have always been rather inert in that they take the power and pay the bill, and that’s sort of the end of it,” she said.
“But these days with rooftop solar, a lot of people are putting in batteries. A lot of people will be buying electric vehicles. That means that people will be storing power and they can also, of course, export it. So consumers are going to have the opportunity to have sort of smart little energy systems in their homes.”
The board’s accompanying report on the health of the national electricity market charts progress against the strategic energy plan agreed at the Council of Australian Governments in 2019.
That plan was designed to make sure energy stayed affordable, reliable and secure as coal plants closed and more renewables came on line.
“Progress is being made and the outlook is improved on previous years,” the report said.
The biggest concern was still maintaining the supply of electricity in a market with more variable renewable generation. The ageing coal fleet was also becoming less reliable, the report said.
Emissions in the market would be 25% lower than 2005 levels by the end of 2020, the report said. By 2030, this drop would be well over 50%.
The Covid-19 pandemic had also created affordability issues for consumers. Renewable generation had driven lower prices, the report said, but a failure to deliver a “smooth transition” could see prices go up again.
The federal energy minister, Angus Taylor, said the nation needed “a coordinated approach to market design to keep the lights on and costs down”.
“The NEM needs to adapt to address risks to reliability, security and affordability, particularly sudden, unexpected exits of thermal generators,” Taylor said in a statement.
“We need long-term signals for private sector investment in reliable generation and storage, to replace exiting generators with like for like capacity.”
The ESB paper rules out a Grattan Institute proposal requiring coal-fired plants to nominate their own closure timeframes and then make ongoing payments to the energy market operator, which are held so that compliance can be enforced.