Statement: Australian Government Energy Announcement

Chief Scientist Dr Alan Finkel has made a statement on the Australian Government’s energy announcement.

17 October, 2017

1) The electricity Review that I chaired proposed an orderly transition (Recommendation 3.2) to achieve the key outcomes of increasing security and reliability, affordability and lowering emissions. I am pleased that the Australian Government asked the Energy Security Board to provide advice on this matter. The Energy Security Board was one of the key recommendations from our Review. Consisting of the energy market regulators and an independent Chair and Deputy Chair, it is the country’s most authoritative voice in energy matters.

2) I know from consultations with the Energy Security Board in the later stages of the development of the new proposals that the process was thorough.

3) The orderly transition proposed in our Review consists of three parts.

  • First, an agreement by Commonwealth, State and Territory governments to an emissions reduction trajectory for the National Electricity Market.
  • Second, a credible mechanism to enable the regulators to ensure that new low emissions energy enters the market. We compared a number of mechanisms and concluded that, on balance, of those we analysed the Clean Energy Target mechanism was preferred. However, other mechanisms could be used by the regulators to achieve the same goal. The Government’s commitment to a retailer obligation for low emissions energy under the National Energy Guarantee appears to be a credible mechanism.
  • Third, a requirement that entry of new low emissions generation should occur in the context of a Generator Reliability Obligation for new generators (Recommendation 3.3). The Government’s National Energy Guarantee imposes an equivalent obligation on retailers to ensure the reliability of the electricity system is preserved as new low emissions generation enters.

4) Success of the proposed emissions and reliability guarantees in the National Energy Guarantee will depend on extensive consultation by the Energy Security Board with all market participants.

5) Given that the existing operation of the National Electricity Market is managed by the Council of Australian Governments (COAG) through the National Electricity Laws, it is appropriate that the integration of the entry of new low emissions generation into the market is managed through the same laws.

With the adoption of a process for an orderly transition, Australia will be able to strategically manage its electricity supply for maximum benefit.

Dr Alan Finkel

Australia’s Chief Scientist