Experts Reject ‘Warmed’ Energy Project | Western Magazine

A proposed energy market that would pay producers to guarantee electricity supply has been criticised.

Existing coal and gas-fired power stations as well as renewable energy providers would be eligible for additional peak payments under a “capacity mechanism” proposed to energy ministers.

The draft plan prepared by the Energy Security Board of Regulators says the scale of investment to maintain supply reliability over the coming decades is “dramatic”.

A draft mechanism prepared last year under former energy minister Angus Taylor has been labeled “CoalKeeper” by critics, who have dismissed it as extending the life of high-emitting coal-fired power stations.

“What the ESB came up with is the warmed-up version of the absurdity they’ve come up with before,” energy economist Bruce Mountain told AAP on Monday.

“It’s just not believable.”

Energy analyst Johanna Bowyer said proposed payments to coal and gas producers could keep high-emissions capacity in the system longer, delaying the move to a low-emissions electricity system.

“This could put upward pressure on electric bills at a time when bills are rising in many states,” she said.

The Smart Energy Council says more support is needed for commercial and community-wide batteries to save wind and solar power.

There are also calls for a new renewable energy storage target for Australia to achieve at least 82% renewable energy generation by 2030.

Under such a system, credits could be created by batteries, pumped hydro, or other energy storage sources, and purchased by energy retailers or traded in a new market.

“This explicitly takes carbon into account and is a target for introducing new technologies,” Professor Mountain said.

He said regulators were “completely out of touch” and had failed to consider federal and state emissions reduction targets.

“They have set big goals, they want big changes.”

Victoria on Monday excluded electricity generated from fossil fuels from a future capacity market, while NSW said it would include gas in its future energy mix.

Energy Security Council Chair Anna Collyer said the mechanism will be a key tool to ensure the reliability of electricity supply during an unprecedented period of transition.

Leaving room for negotiation, Climate Change and Energy Minister Chris Bowen said the proposal “simply informs state and territory ministers and myself of the issues to be addressed”.

“It is appropriate that states can implement this in a way that suits their needs, but … it will complement our emissions reduction goal, not contradict it.”

Electricity and gas company Origin told AAP it wanted to understand how the program would distinguish existing plants from new ones, and assess the capacity brought by different technologies.

“Recent market events have underscored the need for urgent action to establish a mechanism that rewards dispatchable capacity,” a spokeswoman said.

“This will be important to support reliable supply as the energy transition accelerates.”

Australia’s biggest energy producer and biggest emitter, AGL, welcomed the draft plan.

“Minimizing costs to customers and ensuring an orderly and responsible transition should be at the heart of any mechanism,” the company said.

“We will take the time to review the document and make a submission to ESB in due course.”

Most market participants expect all coal generation to cease by 2043.

While Queensland’s plants are younger and have more time to operate, aging coal-fired plants in Victoria and New South Wales are set to become unprofitable this decade, the plan warns.

At the same time, electricity demand is expected to at least double by 2050.

Energy regulators say it would be better to keep existing generators on the market to minimize costs for consumers.

Large companies and industrial premises equipped with renewable energy, which supply an increasing share of electricity to the national electricity market, could also be affected by capacity payments under the proposal.

Demand-side assets such as batteries and new software are another source of “efficient resources” for the capacity mechanism, regulators say.

Comments on the proposal are expected by July 25, with a finalized plan expected by the end of the year.

Australian Associated Press