In the few short months since the publication of the committee's interim
report, public debate concerning Australia's energy policy and the transition
away from a fossil fuel-dominated system of electricity production has reached
fever pitch. Significant blackout events in South Australia and New South Wales
over the summer months have focused much attention on the roles of the various
components of our energy system. Ad-hoc policy pronouncements from both federal
and state governments in early 2017 have only added to the confusion and
regulatory uncertainty, without moving the country any closer to a cohesive
national plan for energy transition.
Globally, it is clear that the era of coal fired power generation is
drawing to a close. Recent policy announcements from India and China in
particular show that this is occurring more rapidly than could have been
predicted even a few years ago. Cost reductions in renewable technologies,
combined with the swift advancement of energy storage technologies, mean there is
now no need for additional coal fired generation capacity to be built
Strong leadership is required from the Australian Government to forge a
comprehensive national policy response to deal with this transition—leadership
which has been sorely lacking in recent times.
Reality of the transition away from coal fired power generation
The age and declining economic potential of Australia's fleet of coal
fired power generators, as well as Australia's commitment to reducing its
carbon emissions footprint in line with the Paris Agreement, means it is
inevitable that many of these coal fired generators will cease operations in
the medium term. This will be the case even in the absence of any further
policy measures from government to encourage closure of these generators and
further uptake of renewable generation.
The question is not if coal fired power stations will close, but how
quickly and orderly these closures will occur, and what supporting policies, if
any, will be in place to help manage the process.
Strong evidence to the committee suggested that for Australia to make
emission reductions consistent with meeting the Paris goals and carbon budget
the equivalent of one Hazelwood sized coal-fired power station a year needs to
It is imperative that this reality is acknowledged by government,
industry and the broader community, so that this transition can be adequately
planned for and implemented at the lowest cost to consumers, taxpayers, workers
Need for an orderly closure process to encourage price stability and
Some stakeholders have put forward the view that no further policy
consideration or intervention is necessary to facilitate an orderly exit of coal
fired power generators from the market. This view was vigorously refuted by
other submitters and witnesses, who argued that leaving retirement decisions
solely to plant operators creates inefficient outcomes, causes greater price
volatility and exacerbates the instability and costs for affected workers and
The experience of announced coal fired power station closures in
Australia over the last four years shows that companies, on average, have given
less than four months' notice to affected workers and communities of upcoming plant
From a national, long-term planning perspective, this is clearly unacceptable.
It highlights the need for an orderly closure process to be facilitated by
government on a nation-wide basis, with closures announced ahead of time to give
certainty to investors, take into account impacts on the broader electricity
system, and allow for a just transition for affected workers and communities.
The committee has heard that uncertainty around the government's future
energy and climate policies are a key factor undermining the ability of market
participants to make informed long-term investment decisions. A coordinated,
national approach to energy decarbonisation must be pursued, with collaboration
between all three levels of government, industry and workers being key to
ensuring that regional issues around plant closures are given due prominence.
The need for a national approach means that it is imperative for the
COAG Energy Council to agree on a mechanism for the orderly retirement of coal fired
power stations. This should include amending the National Electricity
Objectives to include a pollution reduction objective in addition to the three
existing objectives of reliability, safety and security.
The committee considers that this transition to a low-carbon electricity
sector will also require coordination by a standalone statutory authority that
can oversee the implementation of mechanisms to close coal fired generators and
measures to support workers and communities, as argued for by various stakeholders
to the inquiry.
The committee has taken considerable evidence since its interim report,
through the receipt of additional written submissions and two further public
This evidence has only strengthened the committee's views articulated in
its interim report, namely: that the transition away from coal fired power
generation towards renewable sources of generation is inevitable; that this
transition is already occurring; and that urgent and decisive action from
government at all levels is required to facilitate this transition in an
orderly and efficient fashion.
The committee made four recommendations in its interim report:
The committee recommends that the Australian Government adopt a
comprehensive energy transition plan, including reform of the National
Electricity Market rules.
The committee recommends that the Australian Government, in consultation
with industry, community, union and other stakeholders, develop a mechanism for
the orderly retirement of coal fired power stations to be presented to the COAG
The committee recommends that the Australian Government, through
representation on the COAG Energy Council, put in place a pollution reduction
objective consistent with Australia's obligations under the Paris Agreement in
the National Electricity Objectives.
The committee recommends that the Australian Government establish an
energy transition authority with sufficient powers and resources to plan and
coordinate the transition in the energy sector, including a Just Transition for
workers and communities.
The committee reiterates these recommendations and urges the government
to consider and respond to these recommendations as a matter of urgency.
Additional issues and recommendations
In addition to reiterating its initial recommendations, several further issues
were highlighted in evidence provided to the committee since its interim report
which are also worthy of comment and recommendation.
Health and environmental impacts of
coal fired power stations
The committee heard further evidence during its recent public hearings
about the continued negative impact coal fired power stations have on the
health of those who reside in their vicinity and the environment surrounding
them. Despite the longstanding operations of coal fired generators in
Australia, these impacts have not been adequately studied or accounted for in
making decisions about plant longevity and retirement.
It is imperative that these impacts be part of the conversation about
when assets should be retired; in the committee's view, these impacts
strengthen the case for orderly closure of coal fired power stations as soon as
possible. In the interim it is important the proper health assessments be
conducted and enforcement of air standards be undertaken.
The committee recommends:
That the Australian Government commission a comprehensive and
independent assessment of the health impacts of coal fired power stations.
That the Australian Government develop a load-based licencing
arrangement for coal fired power stations for adoption at COAG based on the New
South Wales Load-Based Licencing scheme, with fees that reflect the health
impacts and other externalities of power station emissions.
That the Australian Government take additional measures to ensure
compliance with the standards set in the National Environmental Protection (Air
Quality) Measure and ‑ in the case of sulphur dioxide and nitrogen
dioxide ‑ international best practice standards. In regions where these
standards are exceeded such as the Hunter and Latrobe Valleys, coal fired power
stations must be compelled to reduce emissions to levels below the NEPM
That the Australian Government ensure a more rigorous assessment
of power station emissions through an independent audit of reports provided
through the National Pollutant Inventory.
Rehabilitation of retired power stations
As coal fired power stations and mines are retired there is a need to
properly rehabilitate the sites to ensure a positive environmental and social
legacy. Without adequate rehabilitation bonds or provisioning for the costs of
rehabilitation there is a real risk that taxpayers will end up bearing the
burden of these rehabilitation costs, or alternatively that rehabilitation will
not be performed to an adequate standard.
The owners of the Hazelwood power station recently increased their
rehabilitation provision to $742 million for the power station and mine which
gives an indication of the potential cost of mine rehabilitation.
The committee recommends that the Commonwealth and state energy
ministers should undertake a national audit of likely rehabilitation costs for
existing coal mines and power stations and assess these costs against the
current provisions or bond arrangements.
The committee recommends that the Commonwealth and state energy
ministers should also work to develop a common approach to setting
rehabilitation bonds to ensure that rehabilitation costs are properly
Solutions to enhance reliability
and stability of power generation and delivery
In the wake of recent blackout events, the need to provide solutions
that deliver reliability and stability in the electricity system while
delivering low-emission power generation is clearer than ever.
The committee heard evidence that uncertainty about the timeline for the
retirement of coal fired power stations and the uncertainty about climate and
energy policy has led to significant under investment in new energy generation.
As a result the failure of the Australian Government to put in place
policies to support new energy generation is creating significant pressure and
instability on the NEM.
Investments in large-scale battery storage by the South Australian and
Victorian governments are to be commended, as are funding initiatives from
ARENA directed towards the development of both grid-scale and household battery
storage solutions. Initiatives involving pumped hydro storage and other
grid-stabilising technologies should also be explored, although these may
require longer timeframes to implement and are thus less capable of alleviating
the immediate problems facing the electricity system.
The committee heard evidence that household battery storage
technologies will achieve widespread take-up among consumers within the next
five years, if not sooner. Governments at every level should be doing all they
can to encourage this development and to ensure that the regulatory framework
facilitates innovation in this space, for example through encouraging inventive
technical solutions such as household peer-to-peer trading of electricity.
Applications such as this have the potential to encourage decentralised
generation and distribution of electricity, while enhancing the stability and
integrity of the grid itself.
The committee recommends that the Australian Government continue and
expand the Renewable Energy Target beyond 2020 and consider adopting renewable
energy reverse auctions such as adopted by the ACT to bring more new generation
into the national electricity market.
The committee also recommends that the Australian Government support the
continuing deployment grid level battery storage and of household solar and
battery storage technologies, including making the necessary regulatory
changes, such as aligning the settlement and bidding time periods in the
National Electricity Market, to encourage the utilisation of products that
promote decentralisation of electricity production while enhancing the
stability of the grid.
'Clean coal' technologies
Despite the best efforts of the coal lobby and the current Australian Government,
it has become increasingly apparent that 'clean coal' technologies are too
expensive and unreliable to be competitive with renewable energy sources in the
short term, let alone over the longer asset lifespans of coal fired generators.
Arguments that 'clean coal' can be a viable part of Australia's future
energy mix are an irresponsible smokescreen, designed to prop up an industry in
structural decline and stymie the uptake of renewable, affordable and reliable
The energy industry itself, as well as the financial sector, has made it
clear in recent months that investments in new coal fired power generation in
Australia are not commercially viable, regardless of whether these new plants
are slightly more efficient than the existing fleet of generators. Carbon
capture and storage technologies are also still not commercially viable,
despite many years of investment by both governments and industry into their
The only way new coal fired power stations could be built in Australia
is if they are heavily funded or subsidised by government. This would
constitute an outrageous waste of taxpayer money, and the committee calls on
the Australian Government to commit to not funding any such projects.
The committee recommends that the Australian Government commit to not
provide any direct funding, subsidies or other support for the construction of
new coal fired power stations in Australia.
The committee is concerned that recent policy announcements and
statements by the Australian Government have come in advance of the final
report of the Independent Review into the Future of the NEM currently being
conducted by the Chief Scientist, Dr Alan Finkel AO. These announcements by the
Australian Government have effectively prejudged legitimate policy options,
such as the introduction of an Emissions Intensity Scheme for the electricity
sector, before the independent review has completed its work.
It is imperative that the Australian Government consider all options
presented by the final report of the Finkel Review fairly and transparently, so
that the most efficient and least-cost pathway to achieving a stable,
low-emissions electricity system in Australia can be realised.
The committee recommends that the Australian Government reverse its
ideological opposition to the introduction of a scheme for managing the
transition in the electricity sector such as an Emissions Intensity Scheme or
the setting of pollution intensity standards and commit to considering fairly
all policy options presented by the forthcoming final report of the Finkel
Senator Peter Whish-Wilson
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