Finkel Review: Households Could Save Up To $1000 Over A Decade Under Clean Energy Target

Fairfax - James Massola | Heath Aston

Australian households would save about $90 a year, or up to $1000 on their electricity bills over a decade to 2030 under the Clean Energy Target proposed by the Finkel review of the electricity sector, compared to a business-as-usual scenario for it.
The review, released on Friday at the Council of Australian Governments meeting, argues Australia has a "once-in-a-generation" opportunity to reshape the national electricity market; take advantage of technological change; improve the security and reliability of the system; reward small and large consumers who reduce electricity demand and meet a 26-28 per cent emissions reduction target by 2030.

Labor moves to end climate change policy wars
The federal opposition is indicating it may back a plan for cleaner energy through a low emissions target, a move which could bring to an end 10 years of climate policy wars.

It also highlights a warning from the Australian Energy Market Operator that next summer, both Victoria and South Australia could face electricity supply interuptions following the closure of the Hazelwood coal-fired power station.
Another key recommendation of the report is that power generators should in future have to give three years' notice before closing down.
"This will signal investment opportunities for new generation and give communities time to adjust to the loss of a large employer," Dr Alan Finkel said.
The Turnbull government should also, in its current review of climate change policy, which is due to be released at the end of the year,  should look to set a post-2030 emissions reduction goal through to 2050 to give greater certainty to the sector, and investors.
The report focuses on four key outcomes: how to deliver energy security, reliability, affordability for households and business, and meet Australia's emissions reductions targets.
The call for a new Clean Energy Target (CET) is, as expected, one of the key recommendations of the review and its promise of lower power prices for households will be crucial in Mr Turnbull and Energy Minister Josh Frydenberg convincing conservative MPs the CET is the policy to adopt.

Chief Scientist Dr Alan Finkel's review of the electricity market promises lower prices under a Clean Energy Target. Photo: Alex Ellinghausen

The report examined the effectiveness of the CET and an emissions intensity scheme (EIS) and modelled how both, if calibrated to hit a 28 per cent emissions reduction by 2030, and zero emissions by 2070, would work.
Under the scenarios examined, both a CET and EIS would deliver cheaper power prices for households and consumers, all the way through to 2050, compared to the "business-as-usual" scenario, but a CET would deliver slightly cheaper prices than EIS.
"In the long-term, the CET scenario saw more electricity produced by brown coal than the EIS scenario because there is no penalty for high emissions generators. However, marginally more renewable capacity was built in the CET policy scenario that led to slightly higher overall resource costs over the modelling period," the report notes.
"Under both the CET and EIS scenarios, the renewable generation mix in 2030 was 42 per cent of the generation sent out."
The Renewable Energy Target should be abolished after 2020 and replaced by the CET, the review said.
Dr Finkel's review noted that while energy sector stakeholders had pushed for an EIS, the federal government had ruled one out. Therefore a CET, which has similar ability to reduce emissions, was the preferred option.
The report warns the national electricity market is under stress because of policy uncertainty and says "action should be taken with the aim of creating a market environment in which the electricity sector has the confidence to invest."
"The impact of a high degree of market uncertainty is ultimately borne by consumers in the form of a more costly, less reliable system."
The report predicts that, under a business-as-usual scenario, a CET or an EIS, the use of coal power will decline in the decades to 2050 as older generators come to the end of their life and because "investors have signalled that they are unlikely to invest in new coal-fired generation".
Increasing energy efficiency, greater use of solar on homes and storage will partially offset this but, the report states, it is incumbent on state and federal governments to take "decisive action to ensure the transition to the future grid . . . is smooth and that the electricity system continues to serve the interests of all consumers".
Part of Dr Finkel's blueprint for a more secure electricity sector are measures including obligations on new generators to provide essential services to maintain voltage and frequency.
New wind and solar generators, for example, would have to be able to supply reliable despatchable power - meaning they would have to build a battery, have pumped hydro storage or gas-fired power.
New generators will be required to guarantee supply of electricity when needed at a level determined following regional assessments by the national market operator in a bid to avoid blackouts like the one that crippled South Australia earlier in the year.
Dr Finkel has recommended better system planning, with a system-wide grid plan to inform network investment decisions and ensure security is preserved in each region of Australia.
This would also include a list of potential priority projects to enable development of renewable energy zones.
"Security and reliability have been compromised by poorly integrated variable renewable electricity generators, including wind and solar. This has coincided with the unplanned withdrawal of older coal and gas-fired generators," Dr Finkel said.
The report calls for a new "Energy Security Board" to drive implementation of the blueprint and deliver an annual health check on the state of the electricity system.
Reliability would be further reinforced through a "Generator Reliability Obligation" implemented by the Australian Energy Market Commission and the Australian Energy Market Operator following improved regional reliability assessments.
"The National Electricity Market is 5000 kilometres long, spans five states and one territory and has more than 9 million metered customers. It's essential that we get it right," Dr Finkel said.

Links

• The Finkel review explained: what's in it, and why you should care
• The man who could bring peace to Australia's climate wars
• Independent Review into the Future Security of the National Electricity Market
• Blueprint for the future: Independent Review into the Future Security of the National Electricity Market
• Media Release: Blueprint for a world-class electricity system
• Australia can’t lose in the global race for cheaper, cleaner energy
• Turnbull’s energy game-changer
• Explainer: what is a ‘low emissions target’ and how would it work?
• Australia’s biggest emitters opt to ‘wait and see’ over Emissions Reduction Fund

Finkel Review Anticipates Lower Power Prices, But Weak Electricity Emissions Target

The Guardian - Katharine Murphy

Report by the chief scientist, Alan Finkel, models a clean energy target that would reduce electricity emissions by 28% on 2005 levels

The Finkel review aims for lower power prices as Australia moves towards a greater share of renewables, but with an unambitious emissions reduction target. Photograph: Bloomberg/Bloomberg via Getty Images

Australia’s chief scientist says a new clean energy target will deliver lower power prices to consumers than the status quo, but his report also models a scheme with a low target for emissions reduction from the electricity sector.
In his much anticipated review of the national electricity market, Alan Finkel has examined a scheme with an emissions reduction target of 28% on 2005 levels by 2030, rather than the reductions of 60% that some experts say would be necessary for Australia to meet its whole-of-economy pollution reduction target under the Paris climate accord.
Finkel’s report, given to the Turnbull government and the premiers on Friday, says the clean energy target (CET) modelled by the review would result in lower residential and industrial electricity prices than leaving policy settings unchanged.
It says the CET scenario is more favourable to the hip pocket than an emissions intensity trading scheme – a form of carbon trading supported by a range of experts and industry stakeholders – but the CET would see more electricity produced by brown coal “because there is no penalty for high emissions generators”.
The report also warns governments that setting a higher target for electricity than a 28% reduction on 2005 levels by 2030 trajectory “may have consequences for security, cost and reliability”.
The proposed CET would replace the existing renewable energy target in 2020. Modelling undertaken for the review estimates that by 2030, 42% of electricity demand will be met by renewable generation.
As reported by Guardian Australia on Thursday, the Finkel report recommends that power generators face new security and reliability obligations, and it says ageing power plants should provide energy regulators with three years’ notice before they close.
Finkel says all new generators intending to connect to the national electricity market must meet technical requirements to contribute to fast frequency response and system strength.
He says the new rules would require minimum levels of inertia in each region. “This will make the system better able to withstand disruptions like generator outages or interconnector failures,” the report says.
In addition to the notice before shutdown requirements, which are designed to stop a repeat of the Hazelwood closure, the report says the Australian Energy Market Operator (Aemo) should also publish a register of expected closures to assist long-term investor planning.
With a new CET encouraging gas fired power, Finkel recommends Aemo be given “expanded visibility on gas contracts so that it can plan responses to shortages”.
He also calls for an expansion of gas supply. “Governments should also work with communities to encourage safe exploration and production, based on best available evidence, performance data and appropriate financial rights for landholders”.
Ahead of the release of the report, the deputy prime minister Barnaby Joyce said he would be happy to accept a new CET provided it allowed for the construction of new coal-fired power stations.
Joyce said if Australia walked away from coal exports and coal-fired power generation people would need to be “prepared to be poorer”.
The former prime minister Tony Abbott declared on Wednesday it would be a “big mistake” for the government to adopt an emissions target that knocked out new high-efficiency coal-fired power stations.
While Labor has been signalling it will bring an open mind to the review, the shadow climate change minister, Mark Butler, said “you can’t have a clean energy target that defines clean energy to include coal-fired power”.
“Barnaby Joyce was out this morning saying that a clean energy target must accommodate the building of new coal-fired power stations. A CET that accommodates new coal-fired power stations is an oxymoron; it is a contradiction in terms”.
Speaking to reporters at the Council of Australian Governments meeting in Hobart, the prime minister, Malcolm Turnbull, said there was “no barrier to building a coal-fired power station” in the system envisaged by Finkel.
“There is nothing in the clean energy target that would prevent a new coal-fired power station being built,” the prime minister said.
Challenged on whether a coal fired power station would be built in the absence of substantial government subsidy, Turnbull said: “Thank you for your opinion on that but others would differ. Time will tell”.
Turnbull said a CET had a number of “very strong virtues.” He said the system was technology neutral and administratively familiar. “It would follow on from the renewable energy target and business is used to it”.
The Greens climate and energy spokesman Adam Bandt said the new arrangements proposed by Finkel were weaker than the system proposed by John Howard in 2007.
“The Finkel report is full of good ideas, but the key proposal of a CET is far worse than the version John Howard announced in 2007 and will see consumers subsidise gas and let coal keep polluting,” Bandt said.
“Bill Shorten and Labor cannot end the climate wars by running up the white flag and blindly signing up to a deal with the Liberals.”
Finkel told reporters after Friday’s Coag meeting in the system he was proposing, there was “no prohibition of any kind that prevents that coal from being built.”
The chief scientist said it was “conceivable” that new coal fired power stations could be built, and he said it was “probably more likely that the existing coal stations will run longer than they would under a business as usual model” because there was now a price signal to determine future investment decisions.
He said his recommendations did not have an eye to political considerations. Finkel said he approached the task “absolutely objectively”.
Asked whether the 28% target was too low ball to meet Australia’s Paris commitments, Finkel said his intention was to ensure “the electricity sector does at least its fair share in meeting those international obligations”.
He said it was up to the government to determine whether a 28% target was acceptable and it was beyond the scope of his terms of referene to determine how the economy wide emissions reductions should happen.
“How those obligations are met across the whole of the economy is beyond the terms of reference,” Finkel said.
The review examined the relative market share of technologies under a business as usual case and a CET system.
By 2030, if policies remained as they currently are, 14% of generation would come from wind, 8% from hydro, 3% from large scale solar, 1% from biomass, and 9% from rooftop solar.
Coal would make up 57% and gas 8%. Large scale intermittent generation – from wind power and large scale solar – would be 17%.
By 2030, under a CET, the relative mix would see 18% of generation from wind, 8% from hydro, 6% from large scale solar, 1% from biomass, and 9% rooftop solar.
Coal would drop to 53% and gas to 5%. Large scale intermittent generation would be 24% of the market.

Links

• Finkel gives Turnbull a chance to end climate wars but policy may explode on impact
• Analysis Low emissions target: how it would work and why the benchmark figure is a red herring
• Alan Finkel’s emissions target breaks Australia’s Paris commitments
• BlueScope Steel backs low emissions target as way to achieve energy balance
• Power prices will soar if energy policy doesn't change, Frydenberg warns
• It's way past time to speak truth to climate arguments this stupid
• Renewable energy spike led to sharp drop in emissions in Australia, study shows
• Government 'clean coal' push would be likely to make Australia's emissions worse
• Shorten fails to specify cost of Labor's renewables policy when asked four times
• Fossil fuel divestment is worth $7tn globally yet Australia still clings to coal

The Finkel Review At A Glance

The Conversation - Madeleine De Gabriele | Michael Hopkin | Wes Mountain

The Finkel review aims to introduce certainty into Australia’s energy market. Reuters/Tim Wimborne

The long-awaited report from Chief Scientist Alan Finkel into Australia’s National Electricity Market was released today.
The key recommendation is the adoption of a Clean Energy Target. This mandates that energy retailers provide a certain amount of their electricity from “low-emissions” generators – sources that produce emissions below a threshold level of carbon dioxide per megawatt.
Crucially, Dr Finkel has not made a recommendation as to the precise threshold or the number of certificates to be issued, saying:

The Panel acknowledges that the specific emissions reduction trajectory that should be set for the electricity sector is a question for governments.
At a minimum, the electricity sector should have a trajectory consistent with a direct application of the national target of 26-28% reduction on 2005 levels by 2030, as per Australia’s international obligations under the Paris Agreement.

The Finkel Review at a glance

Recommendations

Next steps

From the Chief Scientist

Links

• Independent Review into the Future Security of the National Electricity Market
• Blueprint for the future: Independent Review into the Future Security of the National Electricity Market
• Media Release: Blueprint for a world-class electricity system
• Australia can’t lose in the global race for cheaper, cleaner energy
• Turnbull’s energy game-changer
• Explainer: what is a ‘low emissions target’ and how would it work?
• Australia’s biggest emitters opt to ‘wait and see’ over Emissions Reduction Fund