Australian Energy Market Commission (AEMC) CEO, Benn Barr, explains how 2023 marks a crucial turning point for Australia’s energy sector.
There’s no escaping change in the way we produce, store, distribute and consume power if we want to get to net zero by 2050.
In the same way that we’ve seen record-breaking temperatures, year on year, now we’re seeing the pace of change in energy increase exponentially.
It’s no longer a debate about where we are headed. We all understand the scale of the transformation required to reach our 2050 goals. This is like a global Manhattan Project meeting the moonshot, with WW2 reconstruction added on for good measure.
The last 12 months have given us optimism. We have the collective will to head in the same direction and we are amending the National Energy Laws as a signal of this to include emissions reduction for the first time. This is a profound change that brings together energy and climate policy.
However, the last 12 months have also given us a reality check.
It’s a time for making hard decisions. The time for magical thinking on this challenge is over – there isn’t some piece of technology or one change that is going to make all this happen and keep prices down and lights on.
The first challenge around transformation is the work required for transmission – AEMO’s Integrated System Plan calls for $14+ billion in new spend.
There are issues we need to fix with the regulatory framework, but just as importantly, if not more importantly, there are issues with how we build this infrastructure to maintain the community's willingness to be engaged with, and pay for, the development.
A key area is ensuring that the economic assessment process supports timely, efficient delivery of the 10,000 or so kilometres of new transmission that must be built.
Energy Ministers have reached agreement on Transmission Access Reform which will deliver net benefits to industry and consumers of up to $ 5 billion and lower emissions of 23 million tonnes of CO2 by 2050.
It will send signals to investors on the best place to build generation, storage and dispatchable assets so we only build the transmission we need. This will build the value in renewable energy zones and ultimately get energy to customers as efficiently as possible at the lowest cost.
We’re about to commence a review that looks at the short-term measures in place to manage reliability risks.
Even more importantly for the longer term, we will soon be commencing another rule change from the Reliability Panel on the market price cap.
The market price cap has traditionally been the mechanism designed to send long-term investment signals. The Panel has recommended it increase from $15,500/MWh to $21,500/MWh by 1 July 2027. However, when the Panel was looking at the level of the market price cap, it recognised that increasing the cap is only the first step in the long-term solution.
So, this year the Panel will work on what happens after July 2028.
A critical area that can be overlooked is also the least predictable – consumer energy resources, or CER. Basically, CER is household rooftop solar, although we anticipate increasing activity from the growing domestic battery fleet and the future of two-way EV charging.
For now, we’re relying on those rooftop panels at a scale no one imagined back when the TV advertised hot water as ‘free from the sun’.
We’re at an interesting juncture – where panels purchased for personal use, with a side-benefit of government subsidies and feed-in tariffs, have become a significant part of the national power infrastructure.
An example of supporting innovative approaches to CER is our rule change to unlock flexible trading arrangements. This clears the way for new kinds of enterprises, such as home energy management services.
- Edited version of a speech delivered at the Infrastructure Partnerships Australia Energy Symposium in Sydney.
About the Author
Benn Barr is the CEO of the Australian Energy Market Commission (AEMC), an independent authority advising Australian energy and climate change ministers, and is directed by an expert five member commission.