05 March, 2017
Courtesy of the AFR
EnergyAustralia and AGL Energy have backed BHP Billiton’s call for an emissions intensity scheme (EIS) for the electricity sector to provide stability and certainty in the National Electricity Market as well as reduce the nation’s carbon emissions.
While the Turnbull government has ruled out an EIS ahead of this year’s review into its climate policies, two of Australia’s biggest energy companies have told the Finkel review a price on carbon, in the form of an EIS for the electricity sector, would fill the policy gap which has crippled the energy sector over the past 10 years and allow the smooth introduction of renewable energy into the NEM.
“We think an EIS is the appropriate way to go. But the politics is making it very difficult to make good politicians to do the right thing,” EnergyAustralia managing director Catherine Tanna said in an interview with The Australian Financial Review.
AGL Energy said an EIS should be incorporated with the orderly closure of coal-fired power plants that should not be allowed to operate for longer than 50 years unless they are retro-fitted to become carbon neutral.
Extensive modelling for the Finkel review by the Australian Energy Market Commission and the Australian Energy Market Operator late last year, found an EIS was 60 per cent cheaper than extending the Renewable Energy Target.
While others have called for a major overhaul of the NEM to deal with the influx of renewable energy such as wind and solar, Ms Tanna, who is also on the board of the Reserve Bank of Australia, said there only needed to be minor modifications to the electricity sector.
“We just need to be really clear first before we start talking about crazy ideas to fix ill-defined problems,” she said. “I think the truth is our NEM has served the country well. Some positive adjustments can be made but we’re not in a position where we need a radical overhaul.”
Ms Tanna said there needed to be more transparency in the NEM. She called on generators to give advance notice of when they intended to leave the market – or face penalties – to avoid shocks to the NEM. This would give ample time for investment decisions to fill any gaps in the market.
Ms Tanna said the missing ingredient in the electricity market was confidence, both in terms of business investment and for consumers. EnergyAustralia, which is owned by Hong Kong-based CLP Group, owns a string of thermal coal, gas and hydroelectricity assets in Australia.
“Whether we’re talking about an investor backing new, cleaner generation to replace coal or a business entering a long-term energy contract, it comes down to one thing – confidence. The energy industry doesn’t have it and our energy system is on life support without it,” she said.
“The real challenge here is to get the right balance between affordability, reliability and clear energy. If one is disproportionately favoured, the other two suffer.”
AGL recommended the introduction of an age-based closure rule for coal-fired power stations so that facilities that are 50 years old must either be shut down or be retro-fitted with carbon capture and storage technologies to become carbon neutral.
“The decarbonisation and modernisation of the electricity sector will span several decades and a long-term vision and trajectory for this transmission is essential to ensuring continued investment in low or zero-emissions energy sources and the orderly phase out of existing emissions-intensive power stations,” AGL chief economist Tim Nelson said in its submission to the Finkel review.
The Australian Energy Council, which represents 21 electricity and gas companies, said the lack of national policy certainty was now the biggest single driver of higher electricity prices, with a decade of inaction over climate policy effectively equivalent to a carbon price of more than $50 a tonne.
“This suggests that development of durable and efficient national energy policy and climate policies, which return investment to the market, are likely to reduce electricity prices,” it said in its submission.
The Energy Users Association of Australia submission found that electricity and gas prices had increased for its members over the past five years by between 80 to 120 per cent, with some companies facing an increases of more than 150 per cent.
It comes as Greenpeace on Monday will launch a new campaign to target the Commonwealth Bank over its funding of fossil fuel projects, saying Australia’s largest bank should rule out lending money to future projects such as Adani’s $16.5 billion Carmichael mine in Central Queensland.