Blistering assessment gives Australia ‘just months’ to fix nation’s energy security

Melissa Clarke
https://www.abc.net.au
6th Jan 2021

Australia has “just months” to fix major problems with the electricity market, according to a blistering assessment of the state of the energy sector.

Chair of the Energy Security Board, Dr Kerry Schott, said “years of insufficient action” and “band-aid solutions” have characterised Australia’s response to growth of renewable energy generation.

She warned the market needed a rapid redesign to ensure the lights stay on.

Her comments came as the Energy Security Board (ESB) released its latest Health of the National Electricity Market report.

The ESB was established by the energy arm of the Council of Australian Governments to “support the transition of Australian energy markets and advance the long-term interests of consumers”.

It has oversight of energy reliability, security and affordability.

The report found that security of electricity supply “remains the most concerning issue” for the National Electricity Market (NEM), which includes all states and territories except Western Australia and the Northern Territory.

“Increasing penetration of variable renewable energy resources … is making it more difficult to maintain security,” the report said.

“To manage security issues, AEMO (Australian Energy Market Operator) has had to intervene in the market far more than in earlier years.”

AEMO issued more than 250 directions in 2019-20, compared to 158 the previous year.

A direction is when some power generators are asked to increase or decrease their output to shore up electricity supply.

The report welcomed the growth of renewable energy, citing its success in “substantially” lowering emissions, with the electricity sector on track to cut emissions by more than 50 per cent by 2030 based on 2005 levels.

But in an accompanying statement, Dr Schott warned the failure of regulation to keep pace has become a critical issue.

“The technology and renewables-driven transformation of our energy market is no longer an if or when proposition. It is here and now,” she said.

“The current set of systems, tools, market arrangements and regulatory frameworks is no longer entirely fit for purpose.

“This pace of change means there are now just months to finalise the redesign of the electricity marketplace so consumers can reap the benefits of this change.”

Quick action crucial to minimise disruptions

State governments have been implementing their own renewable energy policies, given the failure of successive energy and emissions reductions policies at the Commonwealth level.

Dr Schott said the states’ actions are understandable given “years of insufficient action” across the sector, but warns the “diminishing patience of governments” could undermine the NEM.

She also noted the some players in the electricity sector were resistant to change.

“Some seem to be more interested in protecting the status quo or perhaps their own interests rather than addressing challenges in the long-term interests of the community,” Dr Schott said.

Federal Energy and Emissions Reduction Minister Angus Taylor said Australians should not be worried about their power supply.

“But it is clear from this report that there is more work to be done if we are to eliminate risks we see on the horizon,” he said.

Federal Energy and Emissions Reduction Minister Angus Taylor agreed that taking action now was critical to minimise disruptions.

“We need a coordinated approach to market design to keep the lights on and costs down.”

The ESB is currently examining options to improve electricity supply security, including a nationally consistent approach for state and federal governments to underwrite development of “firming” technology, such as pumped hydro and gas plants.

Improving the Retailer Reliability Obligation, introduced by the Federal Government in 2019, is also on the cards, given it has been widely criticised in the sector as being cumbersome and ineffective.

Labor’s spokesman on climate change and energy, Mark Butler, said the Federal Government had failed to put in place policies to support the growth in renewable energy.

“We’ve had warnings now for several years about the security of our electricity system and business groups and regulators warn that the lack of an energy policy from our federal government is a major driver of those security concerns,” he said.

“At the end of the day, a national electricity system is the responsibility of the national government.”

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