Australia’s main electricity market will prioritise cutting emissions as part of its objectives for the first time since its creation a quarter of a century ago, a shift that could set up conditions for a carbon price, experts said.
Federal, state and territory energy ministers are scheduled to meet in Canberra on Thursday for a dinner before holding formal talks on Friday. It will be the first gathering since the national electricity market (NEM) was suspended in June after the market operator had to resort to whiteboards and spreadsheets to order generators online.
The ministers, who will be briefed on the nine-day market shutdown, have been sent 600 pages of reading. “You can’t fault [federal energy minister Chris] Bowen and his love of being organised,” one insider told Guardian Australia.
According to a draft of the planned communique, ministers will agree “to put an emissions objective to the national electricity objective” (NEO). Currently, the objective sets “price, quality, safety and reliability and security of supply of electricity” as the goals.
“Reflecting emissions reduction goals in the NEO is important for ensuring emissions intensity of generation is considered and reducing emissions is prioritised,” said Shane Rattenbury, the ACT minister for energy and emissions reduction.
“We cannot deny the need to decarbonise our energy supply. Reflecting the net zero emissions goal in the NEO will help to ensure an efficient and coordinated national approach to decarbonisation, so that we can make this transition as smooth as possible.”
The ACT won approval at an energy ministers’ meeting last September to start work with the Queensland government on updating the NEO. The Victorian energy minister, Lily D’Ambrosio, proposed amending the objective in 2016 to include environmental sustainability and climate change along with emissions, but did not get wide support.
Ministers are now likely to proceed with the change.
The NSW Department of Planning and Environment backed investigating a change to both the NEO and the equivalent gas and retail objectives to incorporate emissions reduction as a goal.
“This will demonstrate a commitment to integrating energy and climate policy, in line with a range of existing NSW government policies and positions,” a spokesman said.
Bruce Mountain, the head of the Victoria Energy Policy Centre, said agreeing on a new NEO was a “step along the way” to a carbon price.
“At the very least it gets the regulators to account transparently for the volume effects [of greenhouse gas emissions] of their decisions,” he said.
“So they can say, ‘this option would have a greenhouse impact of that, and this one will have a greenhouse impact of that’.”
Dylan McConnell, a University of Melbourne energy expert, said adding emissions to the NEO would mean undertaking public consultation on and updating the legislation that underpins the national energy market. “It’s next year, or beyond,” he said.
Energy ministers are also expected to be briefed by the Energy Security Board on proposals for a new capacity market mechanism aimed at ensuring minimum levels of electricity generation to reduce the risk of blackouts.
However, the push for a capacity market is losing favour from most generators, while Victoria and the ACT have declared they will not support a mechanism that extends the life of coal- and gas-fired power plants.
“Almost nobody’s in favour of this capacity market,” McConnell said.
Plans for a detailed design to be ready by the end of 2022 now seem unlikely to be met. “To introduce a complete overhaul of the market seems like a tall order,” he said.
Bowen said it was “crucial that we work together to rectify a decade of denial, delay and dysfunction on climate action and the Taylor-made energy crisis”.
“The Albanese government is already working hand in glove with our state and territory colleagues on the capacity mechanism and a number of market reforms,” he said.
D’Ambrosio said the NEO and gas supplies would be of keen interest at the meeting.
“Explicitly including emissions in the national energy objectives will provide strategic guidance to new investments to help to achieve net zero at least cost,” she said.
D’Ambrosio also stressed the need to secure more gas for domestic use rather than exports.
“It is unacceptable that Australia produces so much gas, yet we have a gas crisis because exporters are making super profits,” she said.
“We’ll be seeking agreement for [the Australian Energy Market Operator] to have the power to make sure national gas storage facilities have sufficient domestic reserves, and greater market monitoring by the Australian Energy Regulator to stamp out dodgy behaviour that costs households and businesses.”
