Finkel fights for efficient gas markets

Australia’s Chief Scientist Dr Alan Finkel has unveiled a blueprint to optimise the National Electricity Market as a world-class electricity system that can serve the needs of today and rise to the challenges of tomorrow.

Dr Finkel presented the Final Report of the Independent Review into the Future Security of the National Electricity Market to COAG Leaders in Hobart today.

“Our electricity system is entering an era where it must deal with changing priorities and evolving technologies. If the world around us is changing, we have to change with it. More of the same is not an option, we need to aim higher,” said Dr Finkel.

“If we adopt a strategic approach, we will have fewer local and regional problems, and can ensure that consumers pay the lowest possible prices over the long term.”

Gunning for gas

The report found that the gas and electricity markets are closely connected, and that gas-fired generation can provide a low emissions substitute for coal.

While contribution of gas to electricity generation has declined largely due to higher gas prices and tighter supplies, the report calls for gas market reforms to be driven by the COAG Energy Council and government initiatives to improve supply and affordability.

To improve transparency in all aspects of the gas market, the report finds that:

  • AEMO should have better oversight of gas supply contracts for gas-fired generators.
  • Governments should work with communities and industry to enable the safe exploration and production of unconventional gas, including ensuring that landowners receive fair compensation.
  • Gas industry performance data should be transparent, clear and accessible. This should include seismic activity, fracking fluid composition, aquifer purity and fugitive emissions.

However, the report admits that domestic gas prices are likely to remain high despite market reforms.

Blueprint for the future

“The blueprint released today presents the essential elements for a strategic plan for our electricity future. It is up to Federal, State and Territory Governments to take these recommendations, make decisions, add detail and drive it forward,” said Dr Finkel.

The blueprint will deliver four key benefits for the electricity system:

  • future reliability
  • increased security
  • rewarding consumers
  • lower emissions

The report uses three pillars to achieve these outcomes: orderly transition measures, system planning and stronger governance.

Under the orderly transition pillar, the Review Panel concluded that a Clean Energy Target is the most effective mechanism to reduce emissions while supporting security and reliability.

Existing large electricity generators will be required to give a three years’ notice of closure.

This will signal investment opportunities for new generation and give communities time to adjust to the loss of a large employer.

The orderly transition would be underpinned by agreement from Australian, State and Territory governments to a national emissions reduction trajectory.

During the transition, security will be achieved through obligations on new generators to provide essential services to maintain voltage and frequency.

Further, new generators will be required to guarantee supply of electricity when needed at a level determined following regional assessments by the market operator.

The second pillar of the blueprint, system planning, recommends a system-wide grid plan to inform network investment decisions and ensure security is preserved in each region.

This would also include a list of potential priority projects to enable development of renewable energy zones.

The third pillar of stronger governance 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.

Industry response

The Australian Pipelines and Gas Association (APGA) welcomes the report from Australia’s Chief Scientist Dr Alan Finkel and called for the blueprint to be given the deep and careful consideration it deserved.

APGA Chief executive Peter Greenwood said the report, Blueprint for the Future: Independent Review into the Future Security of the National Electricity Market, highlights the key role that gas should play as we lower carbon emissions.

“Gas generation of electricity has half of the carbon emissions of coal, and increasing the proportion of electricity generated by gas would be a quick way to assist Australia to reach its emissions targets,” said Mr Greenwood.

“As Dr Finkel points out, we need a long-term reliable supply of gas to achieve the dual goals of emissions reduction and energy security.”

Nation building reforms

“The National Electricity Market is 5,000 kilometres long, spans five states and one territory and has more than 9 million metered customers. It’s essential that we get it right,” said Dr Finkel.

“I would like to acknowledge the outstanding work of the four Review panel members: Chloe Munro, Karen Moses, Mary O’Kane and Terry Effeney, and the Review taskforce over the eight months of the Review.”

The Review drew on an extensive public consultation process, with more than 390 public written submissions received and around 450 attendees at public consultation sessions held in five capital cities in early 2017.

The Review also undertook more than 100 meetings with stakeholders.

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