A better energy future for Australia
The Australian Government is powering forward with a plan that will deliver an affordable and reliable energy system that will also help meet our international commitments.
As our energy system transitions, we must ensure there is enough electricity generation to supply households and businesses reliably while delivering affordable power.
Our plan to address Australia’s urgent needs and prepare for the long term is based on engineering and economics.
The Government has already taken steps over the past 12 months to address generation, network and retail costs, while pursuing reforms that place an emphasis on well-regulated markets and technology.
Building on this comprehensive package, the Government is acting on the Chief Scientist’s recommendation that new measures are needed to improve reliability and investment certainty in the electricity sector. To do this, we will take the advice of the independent Energy Security Board and implement a new National Energy Guarantee.
“… we need reliable, affordable and secure baseload. For the first time in 10 years we are finally addressing all three.”
Paul O’Malley, CEO, BlueScope Steel
Tackling the energy ‘trilemma’
A decade-long failure to effectively integrate energy and climate policy has created uncertainty in the market, affecting investment decisions and therefore prices and reliability.
Household electricity prices as at June 2017 have more than doubled over the past decade. Since 2007, this has been driven by network costs and, most recently, generation costs due to high gas prices.
South Australia’s statewide blackout in 2016 and the February 2017 load-shedding events in New South Wales and South Australia were wake-up calls. They threw the spotlight on the energy challenges facing Australia with a greater reliance on intermittent sources of generation and a more decentralised grid. They indicated that the National Electricity Market (NEM), designed in 1998, was no longer fit for purpose.
Australia’s emissions per capita and per GDP are at their lowest levels in 27 years, and emissions in the electricity sector have fallen over the past two quarters as coal-fired power stations have closed and demand has flat-lined. But this cannot come at the expense of the reliability and affordability of our electricity system.
It is in these challenging times that the Government is powering forward with our energy plan.
A National Energy Guarantee
To respond to these challenges, the Government will implement a National Energy Guarantee, as recommended by the independent Energy Security Board.
Formed out of the Independent Review into the Future Security of the National Electricity Market (the Finkel Review), the Energy Security Board comprises an independent chair and deputy chair along with the expert heads of the Australian Energy Market Commission (AEMC), the Australian Energy Regulator (AER) and the Australian Energy Market Operator (AEMO).
The Guarantee is made up of two parts that together will require energy retailers and some large users across the NEM to deliver reliable and lower emissions energy generation each year.
A reliability guarantee will be set to deliver the right level of dispatchable energy—from ready-to-use sources such as coal, gas, pumped hydro and batteries—needed in each state. It will be set by the AEMC and AEMO.
An emissions guarantee will be set to contribute to Australia’s international commitments. The level of the guarantee will be determined by the Commonwealth and enforced by the AER.
This two-part Guarantee, proposed by the Energy Security Board, will deliver affordable and reliable energy for households and businesses without subsidies, taxes, emissions trading schemes or carbon prices. It is a market-based solution that will integrate energy and climate policy to deliver a more affordable, more reliable and lower emissions energy system.
Past approaches have ignored reliability and affordability, rewarding some industries, punishing others and slugging consumers. We are taking a very different course. The National Energy Guarantee does not pick winners—it levels the playing field and is technology-neutral.
The Energy Security Board says these obligations will encourage much-needed investment in the electricity sector.
Based on Energy Security Board advice, it is expected that the Guarantee could lead to a reduction in residential bills in the order of $100–115 per year over the 2020–2030 period.
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