Households To Power Up To Half Australia, Zero Emissions Within Reach: CSIRO

Fairfax - Adam Morton

As the Coalition backs away from a pledge to consider a climate change policy that the energy industry says it needs, a new study is projecting a rapidly growing mass electricity generator for Australia in the decades ahead: the public.
Consumers using rooftop solar panels and batteries will produce between a third and half of Australia's electricity by mid-century if the right policies are introduced, according to a roadmap from the CSIRO and power and gas transmission body Energy Networks Australia.

Bernardi fumes over carbon trading scheme
Coalition MPs voice their displeasure on the government's climate review including an emissions intensity scheme for electricity generators. Vision courtesy ABC News 24

The two-year analysis also found an emissions intensity scheme for the electricity sector - a form of carbon trading that was to be considered by a government climate policy review until that plan was abandoned on Tuesday afternoon - would be the cheapest way to cut carbon dioxide emissions.
It suggests it could save customers $200 a year by 2030, while helping create a reliable electricity grid with zero emissions by 2050.
Energy Networks chief John Bradley said a low-cost shift to zero emissions would depend on a national climate and energy plan with bipartisan support.
"By contrast, carbon policy which could change dramatically at every election, or differs in every state, is a recipe for a high-cost and less secure electricity service," Mr Bradley said.
His call for the Coalition and Labor to come together on climate policy echoes that made by bodies representing energy generators and major industrial companies.
The Electricity Network Transformation Roadmap forecasts that up to 10 million households and small businesses would have solar panels, battery storage, smart homes and electric vehicles if pricing and incentives were changed to better reflect demand. This would "transform the grid into a platform more like the internet, where customers can trade and share energy".

As many as one in five homes now have rooftop solar systems. Photo: Fairfax Media

It recommends an emissions intensity scheme for power stations be introduced by 2020, following a similar call by the Climate Change Authority, now dominated by Coalition-appointed board members.
On Tuesday, Environment and Energy Minister Josh Frydenberg backed away from saying the government would consider this sort of scheme as part of a wide-ranging departmental review of climate policy next year. A handful of Coalition backbenchers, including Cory Bernardi and Craig Kelly, had called for any form of carbon pricing to be rejected.

Illustration: Ron Tandberg. 

Prime Minister Malcolm Turnbull earlier said he had never supported a carbon tax - which the emissions intensity scheme is not - and stressed the climate review was "business as usual".
"It's part of the policy we took to the election in 2013 and 2016 and, indeed, we took to the election in 2010. This is business as usual," he said.
Opposition leader Bill Shorten said Labor would examine whatever the government proposed, but predicted the Prime Minister would buckle to MPs opposed to action on climate change to avoid "civil war". Labor promised an intensity scheme as part of its climate policies before this year's federal election.
An intensity scheme would set a baseline figure for how much carbon dioxide a power station could emit for every unit of power generated, penalising those that breached their limit and rewarding cleaner models that emitted less with free credits.
The report found thermal plants, including coal and gas fossil fuels, would be critical in balancing intermittent renewable energy in the years ahead, but would eventually be replaced by technologies using battery storage and biomass.
Getting there would present significant technical, economic and regulatory challenges. It would transform the system away from its original design - large centralised power stations - to a much more decentralised network.
It said a coordinated plan for 2050 could:

• Make average annual household bills $414 less than they otherwise would have been.
• Cut network costs to consumers by 30 per cent.
• Avoid $16 billion in spending on poles and wires.
• Lead to customers with solar panels, battery storage and electric vehicles earning $2.5 billion a year from network businesses.

The roadmap comes ahead of the Friday release of an interim report into electricity reliability led by chief scientist Alan Finkel, commissioned after South Australia suffered a statewide blackout in September.

Links

• Coalition conservatives furious over climate review
• Power prices, energy security, emissions cuts - and carbon pricing - on the table in climate review
• What's really going wrong with electricity?

Seven Energy Charts That Will Cheer And Frighten About Australia And The World

Fairfax - Peter Hannam

Australia has unmatched renewable energy resources but will meet its climate targets only by intervening to accelerate the retirement of coal-fired power plants, according to Michael Liebreich, founder of global advisory service, Bloomberg New Energy Finance.
Mr Liebreich said the Turnbull government should avoid setting renewable energy targets and instead focus on devising market-based methods to phase out coal.

Anita Ho-Baillie, senior research fellow at UNSW, with a record-breaking solar cell. Photo: UNSW

It  should also avoid "perverse" subsidies, such as the speculated $1 billion loan being considered for Adani's proposed mega-coal mine in Queensland, he said.
The comments come as debate raged among conservative Coalition MPs about the government's plan to review its climate policies in 2017. Causing angst was the plan to examine an emissions intensity scheme for the electricity sector that could generate a carbon price - which prompted a rapid retreat by environment and energy minister Josh Frydenberg.
Mr  Liebreich told a Sydney audience advances in renewable energy technologies were rapid, with solar photovoltaic prices falling by almost a quarter for each doubling of production. For wind, costs sank 19 per cent with each doubling of turbine output. (See chart below.)
Breakthroughs come regularly, with the University of NSW last week revealing it had achieved record efficiency rates for its perovskite solar cells, with prospects of more to come.

The cost of installed capacity for new solar and wind energy had dropped below $US30 per megawatt (or 3¢ per watt) in recent auctions in Chile, Morocco and elsewhere. In Australia, though, the price remains about double that.

Joggers along Shanghai's famous Bund: China's pollution is on the rise. Photo: Andy Wong 

Still, Australia's abundant renewable energy meant the country had potentially the lowest cost for both wind and solar energy. (See chart below.)

Both large-scale wind and solar projects were now cheaper than fossil-fuel energy sources in much of the world, including Australia.
However, their falling costs alone won't see them drop below the existing cost of operating coal plants without some price to reflect the damage of carbon dioxide and other greenhouse gases, Bloomberg said. (See chart below.)

 Australia will have to reduce overall emissions if it is to meet its 2030 goals pledged at the Paris climate summit in 2015.
Yet, on the government's own projects, emissions are going to increase – not fall – on current policies, although Bloomberg predicts some levelling off.
Any effort to go beyond the 2015 commitments - now set for a 26-28 per cent cut on 2005 levels by 2030 - would have to be much deeper if a 2-degree warming limit agreed at Paris is to be met, Bloomberg said. (See chart below.)

Mr  Liebreich said his greatest concern about the election of Donald Trump to be the next US president was not that he would reverse America's long-term slide in carbon emissions.
Rather, the risk was he would stop the use of "US heft" - deployed by Barack Obama - to discourage the building of more coal-fired power plants in Asia.
On current projections, coal use in power stations is expected to keep rising for decades to come, led by India, China and Japan, exceeding any reductions in the rest of the world, Bloomberg predicts. (See chart below.)

As  Bloomberg notes, the promises made in the Paris agreement would need to be tightened significantly - and soon - if the world is to have any hope of limiting global warming to the 2-degree target. (See chart below.)
Warming since the industrial revolution began is about 1 degree, scientists say.

 While the rise in Asian coal demand may cheer resource employees and governments hoping for a revenue bonanza - think of those based in Canberra and Brisbane - Australia may not get the export boost some are hoping.
According to Bloomberg, India's plans to boost domestic coal supplies should see the need for imports evaporate by about 2023. (See chart below.)

While Adani may yet line up local buyers of coal it could export from its planned Queensland mine and displace local Indian suppliers, that would not necessary be the most economic outcome for India.
"Lots of things that are not economically optimal still happen," Mr Leibreich said.
For Australia to provide funding to underwrite the rail line to Adani and other Galilee Basin mines, though, would also be a distortion from a climate change point of view, he said.
"Given what we know of the science…it seems a perverse use of public money."

Links

• Malcolm Turnbull considering new carbon price
• Coalition conservatives furious over climate review
• Time for some transparency on the carbon emissions front
• Backbench forces Josh Frydenberg into humiliating climate policy backdown

Malcolm Turnbull And Premiers Clash Over Climate, Topping A Disastrous Week For Coalition

Fairfax - James Massola | Adam Morton

Prime Minister Malcolm Turnbull's disastrous week-long spat over a climate-change policy review has culminated in a showdown with state premiers in Canberra, and criticism from the nation's chief business group.
Infrastructure, competition and family violence policies also provoked fights between the Prime Minister and state premiers at Friday's Council of Australian Government meeting.

Not happy, Mal!
South Australia's Jay Weatherill and PM Malcolm Turnbull continue their dispute over electricity policy at the post-COAG press conference.

But it was climate policy that dominated the COAG wash-up, with Mr Turnbull accused of trotting out "infantile slogans" in place of evidence-based policy by South Australian Premier Jay Weatherill.
WA Premier Colin Barnett argued a market-based carbon price mechanism had some role to play in reducing emissions and Victorian Premier Dan Andrews advocated a "proper" examination of climate policy that did not rule out anything - including an emissions intensity scheme - before the federal review was completed.

Prime Minister Malcolm Turnbull during the COAG press conference at Parliament House. Photo: Andrew Meares

The COAG meeting capped an awful week for Mr Turnbull and the Coalition, which saw the government abandon plans following a backbench revolt to examine the use of an emissions intensity scheme as part of its 2017 review of climate policy, and Environment Minister Josh Frydenberg - who initially said the review would examine an EIS - thrown under a bus even as he reversed course and said there would be no EIS.
The Business Council of Australia, usually a rusted-on supporter of the Coalition, on Friday slammed it for ruling out any prospect of such a scheme being used to reduce carbon emissions.
"The categorical ruling out of mechanisms to achieve this transition [to a low emissions economy], or imposing arbitrary moratoriums on lower-emissions fuels such as onshore gas, constrains the discussion about how agreement can be achieved," chief executive Jennifer Westacott said.
"Both the preliminary report from the Finkel Review Panel and modelling by the Australian Energy Market Commission highlight clearly the options available to government and the costs of ruling particular policies in or out."
An EIS sets a limit on how much a power station can freely emit for every unit of power generated. Cleaner generators that emit less than the limit earn credits, and sell them to dirtier generators above the baseline.
Presenting an issues paper on the electricity market to COAG, chief scientist Alan Finkel cited evidence from the Australian Electricity Market Commission that it would be cheaper to use an emissions intensity scheme to help reach national climate targets than any other option considered, including doing nothing.
Fairfax Media revealed on Thursday that modelling for the commission found electricity bills for consumers and businesses would be up to $15 billion lower over the decade to 2030 if an emissions intensity scheme was in place than if there was no policy.
The modelling was released on Friday.
Defending his government after the meeting, Mr Turnbull ducked questions about the potential for an emissions intensity scheme to actually reduce prices and vowed their would be no carbon tax or emissions trading scheme under his government.
"Critical to maintaining our international competitiveness is energy prices and energy security. We need to ensure that energy is reliable, we need to ensure that it is affordable. We need, of course, to achieve the emissions target cuts that we have agreed to in the Paris treaty," he said.
"The most striking observation from Dr Finkel this morning was that in the last six years household energy prices have risen by 61 per cent, inflation has been 14 per cent . . . that is a massive increase in the burden on Australian households."
But Mr Weatherill suggested Mr Turnbull had misrepresented what an EIS would do and said it was mischievous to conflate it with a carbon tax or emissions trading scheme.
"It was disappointing to see earlier this week the Prime Minister rule out an emissions intensity scheme, he said, adding that the Mr Turnbull had reverted to the "infantile slogans" he had criticised before becoming Prime Minister.
"The whole point of [chief scientist Alan] Finkel's recommendation is this puts downward pressure on electricity prices," he said.
Dr Finkel told the COAG meeting the electricity grid was undergoing unprecedented change, and leaders had a once-in-a-generation chance to reform it during the inevitable shift to a cleaner supply.
Speaking after the meeting, Dr Finkel told Fairfax Media there was evidence an emissions intensity scheme was compatible with maintaining a reliable grid.
He said benefits included that it would encourage low emissions technology of any kind, whether baseload low-emissions gas or renewable energy.
While Mr Turnbull maintained Australia could meet its climate targets with existing policies, Dr Finkel said they were not consistent the 2030 goal set in Paris. "I don't think it's an impossible target to be achieved [but] we need to be methodical about how we get there," he said.
He stressed that the security of the electricity grid was not as strong as in the past, and investors had lost confidence and wanted a coordinated national approach to energy and climate policies.
And Dr Finkel said electricity prices were high – up almost 50 per cent in six years - partly due to network expansion, but also due to high gas prices. He called for more to be done to increase gas supply.
The big three Labor states - Victoria, Queensland and South Australia - all refused to sign up to competition and productivity reforms after the meeting, citing a lack of federal cash.
NSW Premier Mike Baird nominated infrastructure spending as his key priority for the meeting, citing the "sobering" drop in GDP growth on Wednesday and argued governments needed to set new infrastructure goals to drive new economic growth.
He argued for billions of dollars to be pumped into infrastructure, but Mr Turnbull responded bluntly: "We are not an ATM."
Premier Andrews expressed his disappointment that a national deal on family violence leave had not been reached.
The meeting's put off the issue until a decision by the Fair Work Commission, which is considering an application to include an entitlement of 10 days' leave in all modern awards.
Queensland Premier Annastacia Palaszczuk said waiting for the decision was a missed opportunity, and suggested COAG meet in regional Australia, where people were hurting in the two-speed economy.

Links

• Seven energy charts that will cheer and frighten you
• Government's 'lack of spine' will increase prices: adviser
• Malcolm Turnbull crumbles and rules out carbon price
• Time for some transparency on the carbon emissions front

On Climate Policy And Power Prices Turnbull Is Talking Rubbish. Here Are Some Facts

The Guardian - Katharine Murphy

Ruling out carbon pricing is not, to quote Malcolm Turnbull, doing ‘everything that we can to put downward pressure on energy prices’ – it’s a recipe for keeping prices higher. Photograph: Mick Tsikas/AAP 

"I  just want to be very, very clear that energy prices are too high already. We will do everything that we can to put downward pressure on energy prices. We will not impose a carbon tax, or an emissions trading scheme – that is our position."

This is the prime minister, Malcolm Turnbull, talking to the Melbourne radio host, Neil Mitchell, on Thursday, talking nonsense as it turned out – which is what the government has been doing all week on the subject of climate change.
How do I know he was talking nonsense?
There are any number of reports we can draw on to call out what can only be described as unmitigated, lowest common denominator, political crap emanating from the mouth of the prime minister – but I’ll just pick a couple.
Let me share with you the findings of a report that lobbed into the public domain at the start of the week, sandwiched between the government opening what could have been a rational and productive conversation about climate change and energy policy, and the government melting in a small puddle of panic.
A firm called Jacobs was commissioned by the energy networks industry, in cooperation with the CSIRO, to look very carefully at Australia’s climate policy options. Jacobs is the same economic modelling firm used by the Climate Change Authority to analyse the impact of various policies. The CSIRO signed off on the report.
The firm looked at which policy would allow Australia to meet the emissions reduction obligations the Turnbull government signed up to when it ratified the Paris international climate agreement with the least impact on households.
The answer was very clear. It was an emissions intensity trading scheme.
That would be the scheme the energy and environment minister, Josh Frydenberg, very sensibly floated, after he cleverly and carefully set up the Direct Action review with sufficient breadth to be able to consider it – before he ran a mile when Cory Bernardi, Tony Abbott and Craig Kelly started stamping their feet and flaring their nostrils like a triumvirate of bulls in a paddock.
For readers who want more fine print, I’ll quote Jacobs: “The lowest electricity residential bills occur when the existing set of technology-specific policies are extended to all low-emission options and where trading within the generation sector is allowed.
“This is mainly because of the depressing effect on wholesale prices of bringing in and subsidising the dispatch cost of low-emission generation, with the depressing effect of wholesale prices outweighing the scheme liabilities.”
What this means in English is if you set up a technology-neutral emissions trading scheme in the electricity industry, and allow trading to happen, there’s an implicit subsidy for low-emission power generation, and that delivers lower prices for consumers than some of the alternatives.
You might be interested to know that the emissions intensity scheme (now scorned by the Turnbull government as being a source of upward pressure on household energy bills) would deliver an average saving of $216 a year on household electricity bills compared with business as usual.
Let me say that again lest your eyes have glazed over.
A saving.
Lower power bills.
Now what is the “business as usual” example in the Jacob scenario?
That’s the existing policy mix. That would be the Direct Action policy framework, with tighter baselines to drive the reductions required to meet Australia’s Paris commitments of reducing emissions 26% to 28% below 2005 levels by 2030, plus the existing state-based renewable energy targets, which the government in Canberra claims not to like.
The status quo with the tweaks required to hit the Paris target are not the magic formula to lower power prices, they are the opposite. It’s the most expensive option Jacob looked at.
So ruling out carbon pricing is not, to quote Turnbull, doing “everything that we can to put downward pressure on energy prices” – it’s a recipe for keeping power prices higher than they would otherwise be.
And failing the test he’s set for himself is not the only problem Turnbull faces. Lacking the bottle to have a serious conversation about a rational, long-term energy policy framework to govern the electricity industry, and other high emissions players, is a recipe not only for higher power prices, but also for more energy insecurity.
More blackouts. A less efficient grid.
Now how do I know that? Because the chief scientist, Alan Finkel, has produced a report saying so in no uncertain terms.
Finkel has said people can’t invest in new electricity infrastructure in the absence of regulatory certainty, and when investment doesn’t happen, we have a second-rate grid.
So, to recap this tale of woe, Turnbull’s two key political messages since Frydenberg’s unseemly capitulation to conservatives earlier in the week – that we won’t do carbon pricing lest it inflate power bills, and that governments have a fundamental obligation to keep the lights on – are entirely inconsistent with the actions the government is taking.
The government, by digging in, is inflicting a 10th-rate policy on households, on the institutional investors who fund our grid, on the energy industry, on businesses who rely on power supply to generate economic activity.
Voters are being taken for a monumental ride. The government is acting like an outfit that thinks voters are stupid.
Perhaps this is considered smart strategising in our noxious post-truth political times. Perhaps there’s a gamble here that everything will be fine, because voters have had a gutful of experts and their studies, and journalists and their annoying fact-checking and relentless nit-picking. It’s all about the vibe.
Well here’s some vibe in return. Treating voters with contempt isn’t smart. It isn’t clever. It isn’t in the national interest.
It’s just wrong.
For Malcolm Turnbull, who knows better, and has been better, braver, stronger, more committed to evidence and logic and reason, the wrong is magnified.
Over 20 years of political reporting I have applied a consistent test to the governments I’ve watched: are they trying to do some good in the world? Are they trying to make Australia a better place?
On climate policy, apart from pushing through the ratification of the Paris agreement, which was a laudable gesture, and a difficult one to execute given the government’s poisonous internals, the Turnbull government is not trying to do some good in the world.
Right now, it is failing my fundamental test. It’s trying to skate through, and hope no one notices.

Links

• Finkel review criticises climate policy chaos and points to need for emissions trading
• What an extraordinary, gutless capitulation by Josh Frydenberg
• Emissions trading backflip a recipe for price rises, say business groups
• South Australia says states could go it alone after Turnbull rules out carbon tax
• Malcolm Turnbull rules out carbon tax or emissions trading
• Josh Frydenberg backtracks on emissions trading comments
• Direct Action review: Coalition leaves carbon trading option open
• Direct Action review could bring changes to renewable targets, says PM
• Australia dubbed 'fossil of the day' after lobbying for coal mine at climate talks
• Josh Frydenberg plays down Climate Change Authority call for tougher emissions limits

States Could Go It Alone On Emissions: Jay Weatherill

Fairfax - Phillip Coorey

SA Premier Jay Weatherill says the states could go it alone on carbon. Alex Ellinghausen

South Australian premier Jay Weatherill says he will push the states to go it alone on climate change after the federal government caved to pressure from the right wing and rejected looking at a carbon scheme for the electricity sector.
Despite expert advice that an emissions intensity scheme on electricity generators was the lowest cost and most secure option to transition towards gas and renewable energy while meeting Australia's 2030 emissions reduction target, the government slammed the door on the option after a backlash from conservatives, as well as minster Christopher Pyne, who argued it could be seen as putting a price on carbon.
The Premiers and Prime Minister were to discuss the option at Friday's Council of Australian Governments meeting in Canberra on Friday.
The Australian Financial Review reported that Chief Scientist Alan Finkel, who in October was put in charge of the review into Australia's National Energy Market following the blackouts in SA, approved of an emissions intensity scheme for the electricity sector in a preliminary report to COAG. He had intended to advocate its consideration in a verbal briefing to Premiers, sources said.

In  a discussion paper to be put to COAG, it is understood he endorses the concept which is already supported by the Climate Change Authority, the CSIRO and the Australian Energy Market Commission, which is a COAG advisory body.
Mr Weatherill told ABC radio on Thursday that "in the absence of national leadership", he would be urging the states to team up and implement a nationally consistent scheme of their own.
More so given the experts say it would actually reduce power prices and increase energy security.
"It would clean up our energy system," said Mr Weatherill who will sound out his colleagues ahead of Friday's COAG meeting.
"Our first instinct is of course to seek a national scheme," he said. Mr Weatherill said preliminary advice showed a scheme could be established without federal government support.

An  emissions intensity scheme is not a carbon price or carbon tax in that it does not raise revenue by charging for emissions. Instead it would penalise generators who pollute above a baseline limit.
Cleaner emitters who stayed below the baseline would not pay anything and would receive free credits which they could to trade to bigger polluters.
The policy is similar to the Coalition's current direct action policy that has a "safeguards mechanism" designed to penalise emitters for exceeding limits. Polluters are currently paid from the budget to reduce emissions but this is considered unsustainable beyond 2020.
Experts said the government was now limited to high cost options in order to meet the 2030 targets. These were expanding the renewable energy target or to keep pouring money from the budget into direct action to pay polluters to reduce emissions.
Despite this, Mr Turnbull and his ministers insisted on Thursday the government was committed to low electricity prices.
Mr Turnbull said Mr Weatherill would be putting at risk jobs and business with his plan to go it alone.
"We believe that policies should be national," he said.
Treasurer Scott Morrison said: "We are not interested in a carbon tax. The Prime Minister has never supported a carbon tax. Whether it is an ETS or whatever you want to say. That was settled by the Coalition years ago".
"We are interested in engaging in the engineering of ensuring that our electricity costs, pressures on those are reduced and ensuring we have the sufficient supply, whether it is gas or other important areas that will ensure that energy prices have the cost pressures on them reduced."
The backflip came just 36 hours after Energy Minster Josh Frydenberg released on Monday the terms of reference for a review of climate policy for the decade beyond 2020.
This was promised by Tony Abbott in 2015. On Thursday, Mr Morrison dismissed it as "a very low level, housekeeping review".
The terms of reference opened the door to the purchase of cheap international permits to help meet Australia's 2030 emissions reduction target but made no provision for an emissions trading scheme or a carbon tax. But Mr Frydenberg left open the prospect of an emissions intensity scheme for the electricity industry which produces one-third of the nation's carbon emissions.
"We know that there's been a large number of bodies that have recommended an emissions intensity scheme, which is effectively a baseline and credit scheme. We'll look at that," he said in an interview.
Following the backlash and a cabinet meeting on Tuesday afternoon, Mr Frydenberg said:
"The government will not introduce an emissions intensity scheme, which is a form of trading scheme that operates within the electricity generation sector."

Links

• Capitulation on climate change ignores evidence and will come at a cost
• The Emissions Trading Scheme Should Not Have Gone Up In Smoke
• SA Premier Jay Weatherill says states could set up their own carbon pricing scheme — PM Malcolm Turnbull hits back

Finkel Review Criticises Climate Policy Chaos And Points To Need For Emissions Trading

The Guardian - Katharine Murphy

Exclusive: Report warns investment in electricity has stalled, and existing policies won't see Australian meet its Paris target

The Finkel review note advice from the Climate Change Authority that an emissions intensity scheme 'had the lowest impact on average residential electricity prices'. Photograph: Mick Tsikas/REUTERS

Australia's chief scientist, Alan Finkel, has said investment in the electricity sector has stalled because of "policy instability and uncertainty" – and he's warned that current federal climate policy settings will not allow Australia to meet its emissions reduction targets under the Paris agreement.
In a 58-page report that has been circulated before Friday's Council of Australian Governments meeting between the prime minister and the premiers, Finkel has also given implicit endorsement to an emissions intensity trading scheme for the electricity industry to help manage the transition to lower-emissions energy sources.
While there is no concrete recommendation to that effect, the report, obtained by Guardian Australia, references the evidence from energy regulators that such a scheme would integrate best "with the electricity market's pricing and risk management framework" and "had the lowest economic costs and the lowest impact on electricity prices".
Finkel also notes advice from the Climate Change Authority which says market mechanisms have the lowest average cost of abatement, and of the options modelled, an emissions intensity scheme "had the lowest impact on average residential electricity prices".
The positive commentary from the chief scientist cuts directly across political arguments the Turnbull government has made since dumping its nascent attempt to use the review of the Direct Action policy to explore an intensity trading scheme for electricity – equating carbon pricing with higher power prices for consumers.
The Finkel report was commissioned by the energy and environment minister, Josh Frydenberg, at the last meeting of state and federal energy ministers in the wake of the political controversy that erupted after South Australia endured a statewide blackout in September.
The Turnbull government has wanted to use the much-anticipated report as a springboard to wind back state-based renewable energy targets, which it says are making the electricity market less secure.
But while noting renewables present ongoing challenges to network stability, challenges that have to be carefully managed, Finkel has pointedly warned the federal government its current climate policy is inadequate as it stands.
He also makes the point that a lack of clarity at a federal level about policy and regulatory settings can also affect network security and prices for consumers.
Finkel's report says the relatively short time horizon of federal climate policy, coupled with the Abbott government's attack on the federal renewable energy target, has put investment in abeyance.
"There is evidence that investment in the electricity sector has stalled and investors have become less responsive to investment signals," the report says. "This is due to policy instability and uncertainty driven by numerous reviews into the renewable energy target and a lack of clarity about the policies to reduce emissions after 2020."
"Investment in renewable energy dropped by 52% between 2013 and 2014 and has not yet recovered to the level required to satisfy the RET [renewable energy target]."
Finkel says there is a pressing need for clarity in policy to unlock much-needed investment in the national electricity market, and he says if the clarity fails to materialise, electricity prices will rise for consumers, and energy security will become more of an issue.
"For businesses to take risks on the future and invest, they need to be confident that emissions reduction policies and the mechanisms to achieve them are consistent with Australia's international commitments and will not change drastically in the future."
"Because of the long-term nature of electricity sector investments, investment confidence depends strongly on long-term policy signals."
"The lack of predictability in the electricity sector creates uncertainty around which generation and network assets investors should either invest in or divest from."
"If businesses do not invest when needed, this will impact on the security and reliability of electricity supply."
He also says explicitly the current climate policy, which includes Direct Action, the RET, and the national energy productivity plan, will not guarantee Australia meets its Paris commitments. "While the electricity sector must play an important role in reducing emissions, current policy settings do not provide a clear pathway to the level of reduction required to meet Australia's Paris commitments," the report says.
Finkel says the RET is designed to achieve an increase in large-scale renewable energy generation to 2020 "but not beyond". "The policy also ends in 2030, meaning that projects commencing in 2020 will need to recover their capital costs over only a 10-year period."
He says the Direct Action policy has focused predominantly on land-sector abatement, with very few projects seeking to improve the efficiency of electricity consumption.
Finkel says the safeguard mechanism "is not calibrated to drive emissions reduction".
The Turnbull government on Monday flagged an emissions intensity trading scheme for the electricity sector as part of its scheduled review of its Direct Action climate policy.
But the overture was dumped when Frydenberg folded in the face of internal pressure – a decision which has been widely criticised as short sighted and counterproductive by business, the energy industry and climate groups.
Friday's Coag meeting will also hear a push from the South Australian government to revive emissions trading in the wake of the Turnbull government's decision to preemptively rule it out.
But the push from the premier, Jay Weatherill, appears unlikely to secure unanimous support from other state governments.
South Australia has been leading the charge on an emissions trading scheme for the electricity sector for some months, but New South Wales rebuffed the push on Thursday. The Labor governments in Victoria and Queensland have also backed away from carbon pricing in favour of beefing up their state renewables policies.
Before Friday's talks, Malcolm Turnbull continued efforts to equate carbon pricing with higher electricity prices, and he revived previous criticism of the South Australian government's positive disposition to renewable energy.
"What South Australia is doing is putting at risk the jobs of South Australians, the prospects of South Australian business. Jay Weatherill's approach to energy has been condemned by the business community in South Australia, they're appalled," Turnbull told 3AW on Thursday.
"Major industrial centres – Whyalla, mines, Nyrstar mine and so forth – have had to close down because they don't get reliable power," he said. "The South Australian Labor government has delivered an absolute double whammy of not being able to keep the lights on and having the most expensive electricity in Australia."
But the Labor leader, Bill Shorten, blasted Turnbull for his conduct over the course of the week. "Malcolm Turnbull is demonstrating that he is under pressure, that he is lashing out, and that now he is making terrible decisions about the future of climate change and what governments can do about it," Shorten said.
"Malcolm Turnbull has been muted on taking proper action on climate change. He has been gagged from talking about the solutions we need to tackle harmful carbon pollution."
"This week has become the sickest joke of climate change policy since Malcolm Turnbull got elected."

Links

• South Australia says states could go it alone after Turnbull rules out carbon tax
• Emissions trading backflip a recipe for price rises, say business groups
• Malcolm Turnbull rules out carbon tax or emissions trading
• Josh Frydenberg backtracks on emissions trading comments
• Direct Action review: Coalition leaves carbon trading option open
• Direct Action review could bring changes to renewable targets, says PM
• Australia dubbed 'fossil of the day' after lobbying for coal mine at climate talks
• Josh Frydenberg plays down Climate Change Authority call for tougher emissions limits 

Government Killed Emissions Scheme Despite Knowing It Could Shave $15 Billion Off Electricity Bills

Fairfax - Adam Morton

The Turnbull government has been sitting on advice that an emissions intensity scheme - the carbon policy it put on the table only to rule out just 36 hours later - would save households and businesses up to $15 billion in electricity bills over a decade.
While Malcolm Turnbull has rejected this sort of scheme by claiming it would push up prices, analysis in an Australian Electricity Market Commission report handed to the government months ago finds it would actually cost consumers far less than other approaches, including doing nothing.

States consider carbon trading
South Australia suggests the states set up their own carbon intensity trading system, but Mike Baird is not so keen. Courtesy ABC News 24.

It finds that would still be the case even if the government boosted its climate target to a 50 per cent cut in emissions by 2030.
Depending on the level of electricity use and the target adopted, modelling by Danny Price of Frontier Economics found costs would be between $3.4 billion and $15 billion lower over the decade to 2030.  Costs would be $11.2 billion lower over this time assuming average electricity use and the existing climate target.
It suggests it would bring down the cost of cleaner gas-fired electricity and renewable energy, more than offsetting an increase in the cost of high-emissions coal power.
Environment and Energy Minister Josh Frydenberg flagged this sort of scheme for the electricity industry would be considered as part of a long-promised climate review, but was forced to backtrack after opposition from conservative government MPs opposed to any form of carbon pricing.
The modelling is part of a group reports on the future of energy to be discussed by the Prime Minister and state premiers ahead at a COAG meeting in Canberra on Friday.
They include a preliminary report into the future security of the electricity market by chief scientist Alan Finkel, which warns that Australia has no clear path to meeting the 2030 emissions target taken to the Paris climate deal under existing policies.

Prime Minister Malcolm Turnbull has said the Coalition would not implement an emissions trading scheme. Photo: Alex Ellinghausen

While it makes no recommendations, the Finkel review cites the market commission, Australian Energy Market Operator and Climate Change Authority as all having found an emissions intensity scheme would have lower costs and less impact on energy security than other policies considered.
It comes in a week in which Mr Turnbull launched an aggressive attack on Labor over its support for emissions intensity trading as well as a 50 per cent renewable energy target.

Energy Minister Josh Frydenberg backtracked on making an emissions intensity scheme part of a government review. Photo: Andrew Meares

Interviewed on Melbourne radio station 3AW on Thursday, Mr Turnbull contrasted Labor's position with the Coalition's determination to keep prices down. He stressed that the government would not impose a carbon tax or an emissions trading scheme.
"I just want to be very, very clear that energy prices are too high already. We will do everything that we can to put downward pressure on energy prices," he said.

Illustration: Ron Tandberg 

Under all scenarios considered, the modelling in the commission report seen by Fairfax Media found an emissions intensity scheme was the cheapest option for consumers and business.
That remained the case if the emissions target was beefed up from a 28 per cent to a 50 per cent cut by 2030 compared with 2005 levels. Under the latter consumers and businesses would still pay $3.4 billion less than if no policy was introduced.
If demand for electricity was higher than average, the collective saving on electricity bills was estimated to be $15 billion.
An emissions intensity scheme sets a limit on how much a power station can freely emit for every unit of power generated. Cleaner generators that emitted less than the limit earn credits, and sell them to high-emitting generators above the baseline.
The limit would be gradually reduced. Proponents say it means coal would effectively subsidise cleaner power. They say the scheme would also encourage a greater range of types of cleaner power, which would increase competition and further reduce costs.
It would initially be likely to boost gas-fired power, which has about half the emissions of black coal generation, at the expense of the dirtiest coal plants. Modelling suggests it would supplying nearly a third of electricity by 2030.
Mr Frydenberg issued a statement late Thursday reiterating the government's opposition to any form of carbon pricing.
He said Labor's expanded renewable energy target would jack up power prices and put the nation's energy security at risk, while the Coaliton had triggered the largest reduction in electricity bills experienced by scrapping the Gillard government's carbon price scheme.
He said the government's 2017 review would be the "next step in our methodical approach to climate change policy".
The commission, which sets the rules for electricity and gas markets and has long supported an emissions intensity scheme, was asked to provide guidance to COAG ahead of next year's climate policy review.
The Finkel report was commissioned to give extra advice after the unprecedented statewide South Australian blackout in September. It says the energy system is undergoing its biggest transition since the 1890s as it shifts to lower-emissions energy, a change that cannot be reversed.
But it highlights the significant challenges faced in transforming the system to run on a growing mix of traditional baseload power, intermittent renewable energy, distributed rooftop solar power and battery storage.
It also warns against the ambitious state renewable energy targets set by Labor governments in Victoria (40 per cent by 2025) South Australia (50 per cent by 2025) and Queensland (50 per cent by 2030), saying they could increase costs and investment uncertainty.
COAG will also hear a push form South Australian Premier Jay Weatherill for a states-based emissions trading scheme, though it is unlikely to receive wide support.
Energy and business groups have called for a national bipartisan plan to help plan an orderly transition to cleaner energy, warning a failure to do so would increase both prices and the risk of blackouts.
Labor climate change spokesman Mark Butler told a press conference Mr Turnbull has turned energy policy into a shambles.
"A growing list of organisations and energy experts... have confirmed over the course of this week that this policy is the best way to drive down power prices and improve energy security," he said.
Climate Institute deputy chief executive Erwin Jackson said without a plan the government risked turning Australia into a third-world economy and was making a mistake "of Stalinist proportions".
Mr Price declined to comment.

Links

• Capitulation on climate ignores evidence and will come at a cost
• Government accused of forcing up power prices through climate backdown
• Household solar to power up to half Australia: CSIRO