COAG Energy Council agrees to electricity sector reforms

Monday, 17 July, 2017

The COAG Energy Council last week agreed to a significant set of reforms, claiming they will help deliver a more affordable and reliable electricity system as part of the transition to a lower-emissions future.

At a meeting held in Brisbane, the Energy Council agreed to immediately act on 49 of the 50 recommendations of the Independent Review into the Future Security of the National Electricity Market (NEM), which was presented to COAG leaders five weeks ago. Following the eight-month review, led by Australia’s Chief Scientist Dr Alan Finkel, the council has agreed to these reforms in what is said to be record time.

Key recommendations include:

  • a new Generator Reliability Obligation, which will require intermittent sources of generation to provide an appropriate level of backup to guard against blackouts;
  • the introduction of Energy Security Obligations to provide the necessary support services (frequency control and ancillary services and inertia) to intermittent sources of generation;
  • a new requirement for large generators to give a minimum three years notice before closing; and
  • the establishment of an Energy Security Board to oversee the health, security and reliability of the NEM.

Following an update from the Australian Competition and Consumer Commission (ACCC) on its review into retail electricity prices, the Energy Council agreed to provide greater transparency on the price and availability of long-term electricity retail contracts as well as to give consumers greater real-time control over their energy consumption.

Importantly, governments will be provided with greater visibility of retail electricity prices, retail margins and factors affecting price to ensure they are in a stronger position to respond to any inappropriate market practices.

So what has the response to the reforms been like? Energy Networks Australia CEO John Bradley has welcomed the decision to implement most of the Finkel Review recommendations but says the hard work is yet to be done, claiming the COAG meeting failed to deliver the certainty needed for lower energy bills, security and Australia’s emissions targets.

“Time is running out for a national approach to carbon policy and the exploration and development of gas supplies — which are vital to address energy costs for households and businesses,” Bradley said. He added that a federal government decision to abolish the appeals regime which corrected errors by the Energy Regulator would increase investment risk and, ultimately, costs to energy customers.

The Energy Efficiency Council was more optimistic, with CEO Luke Menzel giving particular praise to the newly implemented ‘demand response’ measure — an initiative that he believes will push down power prices.

“Today Australia’s energy ministers rebooted our energy market reform agenda,” said Menzel. “Among a raft of other measures, they have asked the Australian Energy Market Commission (AEMC) to make a recommendation on how to bring demand response into the wholesale electricity market.

“More importantly they have given them a deadline — the new rule needs to be in place for the summer of 2018–19. That deadline is crucial, because last time the AEMC looked at this, it ping-ponged back and forth between energy market institutions for four years.”

Menzel also welcomed the creation of an Energy Security Board to focus on strategic planning across the NEM and help coordinate action between energy market institutions. He did however say that action is still needed on the Clean Energy Target, which is still under consideration.

“Australia’s energy debate is pretty willing, and there are a huge diversity of perspectives,” Menzel said.

“But when the Australian Energy Council, the Clean Energy Council, the Business Council of Australia and the National Farmers Federation are all saying we need ... a Clean Energy Target as part of the full package of Dr Finkel’s reforms, it sends a strong signal to politicians in Canberra and around the country: let’s get this done.”

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