Governments and industry have time to build a more reliable and cleaner electricity system if plans are put in place now.
That’s the conclusion of an options paper released by the Energy Security Board, which was given the task in March 2019 of redesigning the national electricity market.
An influx of renewable power and the retirement of old, coal-fired generation is pushing the existing energy system to its technical limits.
The ESB is set to advise energy ministers mid-year on how best to tackle the many problems involved in getting a new system up and running.
“The rapid spread of large-scale wind and solar, along with rooftop PV, across Australia means our energy system is experiencing the fastest and most substantial change in the world,” ESB chair Dr Kerry Schott said.
“We are preparing the advice ministers need to enable the critical decisions needed for an affordable, reliable and secure electricity system that can ultimately operate at net zero emissions.”
The first of four areas of work is preparing for an orderly retirement of coal-fired power by enabling the timely entry of new generation, storage and firming capacity.
Among the options are modifications of the new “retailer reliability obligation” which requires retailers to buy advance contracts to fill supply gaps, a possible new operating reserve, and long-term transition cost monitoring.
However, the Australia Institute’s Dan Cass said governments needed to ensure this area of work did not embrace a “seriously risky proposal that would prolong the lives of unprofitable, highly polluting coal power stations in Australia”.
“The whole purpose of market redesign is to allow coal to retire safely and for consumers to benefit from a smooth transition to cleaner, cheaper sources of electricity and grid security services,” he told AAP.
“It is unbelievable that as Australia’s allies and trading partners phase down coal power, Australia could consider extending its reliance on coal.
“This will damage our international reputation, push up prices for industry and households and harm competition.”
A second area of work needed is on backing up power system security.
Security is about keeping the lights on by maintaining the power system’s technical parameters like voltage, frequency and current flows under control and within safe limits.
It’s been recommended either a new operating reserve or another type of procurement mechanism be put in place to ensure the security of the power supply can be shored up without imposing too high a cost on consumers.
The third innovation is making sure consumers installing solar PV, batteries and smart appliances can reap the benefits of doing so, while not putting the system at risk.
Change could include new consumer protections and technical standards, tariff and pricing reforms, management of minimum demand and further investigation of flexible trading arrangements.
A fourth reform is opening the power grid to cheaper large-scale renewables through a series of priority “renewable energy zones”, which would ensure generation and transmission is done in a planned way.
“This is the best chance we have of setting up Australia’s energy system for the future. We can’t kick these challenges any further down the road,” Dr Schott said.
Energy Minister Angus Taylor said the options paper was an important step in ensuring the national energy market was fit for purpose, put downward pressure on prices and kept the lights on.
He noted it included the option of retaining existing coal-fired power “for as long as it is needed”.
“This important work must deliver affordable, reliable power, supported by the right mix of technologies, deliver value-for-money construction of transmission, where it is needed, and adapt to the significant evolution occurring in our market,” he said.
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