Australia’s chief scientist says a new clean energy target will deliver lower power prices to consumers than the status quo, but his report also models a scheme with a low target for emissions reduction from the electricity sector.
In his much anticipated review of the national electricity market, Alan Finkel has examined a scheme with an emissions reduction target of 28% on 2005 levels by 2030, rather than the reductions of 60% that some experts say would be necessary for Australia to meet its whole-of-economy pollution reduction target under the Paris climate accord.
Finkel’s report, given to the Turnbull government and the premiers on Friday, says the clean energy target (CET) modelled by the review would result in lower residential and industrial electricity prices than leaving policy settings unchanged.
It says the CET scenario is more favourable to the hip pocket than an emissions intensity trading scheme – a form of carbon trading supported by a range of experts and industry stakeholders – but the CET would see more electricity produced by brown coal “because there is no penalty for high emissions generators”.
The report also warns governments that setting a higher target for electricity than a 28% reduction on 2005 levels by 2030 trajectory “may have consequences for security, cost and reliability”.
The proposed CET would replace the existing renewable energy target in 2020. Modelling undertaken for the review estimates that by 2030, 42% of electricity demand will be met by renewable generation.
As reported by Hlcarpenter.com Australia on Thursday, the Finkel report recommends that power generators face new security and reliability obligations, and it says ageing power plants should provide energy regulators with three years’ notice before they close.
Finkel says all new generators intending to connect to the national electricity market must meet technical requirements to contribute to fast frequency response and system strength.
He says the new rules would require minimum levels of inertia in each region. “This will make the system better able to withstand disruptions like generator outages or interconnector failures,” the report says.
In addition to the notice before shutdown requirements, which are designed to stop a repeat of the Hazelwood closure, the report says the Australian Energy Market Operator (Aemo) should also publish a register of expected closures to assist long-term investor planning.
With a new CET encouraging gas fired power, Finkel recommends Aemo be given “expanded visibility on gas contracts so that it can plan responses to shortages”.
He also calls for an expansion of gas supply. “Governments should also work with communities to encourage safe exploration and production, based on best available evidence, performance data and appropriate financial rights for landholders”.
Ahead of the release of the report, the deputy prime minister Barnaby Joyce said he would be happy to accept a new CET provided it allowed for the construction of new coal-fired power stations.
Joyce said if Australia walked away from coal exports and coal-fired power generation people would need to be “prepared to be poorer”.
The former prime minister Tony Abbott declared on Wednesday it would be a “big mistake” for the government to adopt an emissions target that knocked out new high-efficiency coal-fired power stations.
While Labor has been signalling it will bring an open mind to the review, the shadow climate change minister, Mark Butler, said “you can’t have a clean energy target that defines clean energy to include coal-fired power”.
“Barnaby Joyce was out this morning saying that a clean energy target must accommodate the building of new coal-fired power stations. A CET that accommodates new coal-fired power stations is an oxymoron; it is a contradiction in terms”.
Speaking to reporters at the Council of Australian Governments meeting in Hobart, the prime minister, Malcolm Turnbull, said there was “no barrier to building a coal-fired power station” in the system envisaged by Finkel.
“There is nothing in the clean energy target that would prevent a new coal-fired power station being built,” the prime minister said.
Challenged on whether a coal fired power station would be built in the absence of substantial government subsidy, Turnbull said: “Thank you for your opinion on that but others would differ. Time will tell”.
Turnbull said a CET had a number of “very strong virtues.” He said the system was technology neutral and administratively familiar. “It would follow on from the renewable energy target and business is used to it”.
The Greens climate and energy spokesman Adam Bandt said the new arrangements proposed by Finkel were weaker than the system proposed by John Howard in 2007.
“The Finkel report is full of good ideas, but the key proposal of a CET is far worse than the version John Howard announced in 2007 and will see consumers subsidise gas and let coal keep polluting,” Bandt said.
“Bill Shorten and Labor cannot end the climate wars by running up the white flag and blindly signing up to a deal with the Liberals.”
Finkel told reporters after Friday’s Coag meeting in the system he was proposing, there was “no prohibition of any kind that prevents that coal from being built.”
The chief scientist said it was “conceivable” that new coal fired power stations could be built, and he said it was “probably more likely that the existing coal stations will run longer than they would under a business as usual model” because there was now a price signal to determine future investment decisions.
He said his recommendations did not have an eye to political considerations. Finkel said he approached the task “absolutely objectively”.
Asked whether the 28% target was too low ball to meet Australia’s Paris commitments, Finkel said his intention was to ensure “the electricity sector does at least its fair share in meeting those international obligations”.
He said it was up to the government to determine whether a 28% target was acceptable and it was beyond the scope of his terms of referene to determine how the economy wide emissions reductions should happen.
“How those obligations are met across the whole of the economy is beyond the terms of reference,” Finkel said.
Asked whether the low target in the Finkel report meant that the government had now given up on meeting Australia’s Paris commitments, the energy minister Josh Frydenberg said Australia had “a very good record of meeting our international targets.”
“Every sector has to do its bit, but I do point out that Dr Finkel in his report does issue a note of caution about adopting targets for the electricity sector beyond 28% because of the ramifications it would have for energy security and affordability,” Frydenberg said.
The Climate Institute’s acting chief executive, Olivia Kember, said it was clear emissions reduction of 28% was too modest.
“It’s absolutely clear that aiming for 28% emissions reductions in electricity isn’t enough,” Kember said.
“For a start, reducing emissions in electricity is much easier than reducing emissions from agriculture and parts of industry, so the smart way to meet a national emissions reduction target is to make deeper emissions cuts in the power sector so that those other sectors have a bit of room”.
“Secondly, under the Paris agreement which Australia signed up to along with 195 other countries, the long-term goal is to limit temperature rise to 1.5-2° celsius. That means net zero emissions by 2050, and so 28% by 2030 just doesn’t take us far enough along the path to net zero”.
The review examined the relative market share of technologies under a business as usual case and a CET system.
By 2030, if policies remained as they currently are, 14% of generation would come from wind, 8% from hydro, 3% from large scale solar, 1% from biomass, and 9% from rooftop solar.
Coal would make up 57% and gas 8%. Large scale intermittent generation – from wind power and large scale solar – would be 17%.
By 2030, under a CET, the relative mix would see 18% of generation from wind, 8% from hydro, 6% from large scale solar, 1% from biomass, and 9% rooftop solar.
Coal would drop to 53% and gas to 5%. Large scale intermittent generation would be 24% of the market.