Backchat Discusses: What to think about Finkel

June 20th 2017


  • Ketan Joshi :: Climate Science

The Finkel Review into Australia’s clean energy policy is not likely to make our climate that much Fin-cooler.

Last week, Australia’s Chief Scientist, on a panel with four others, released a Review to guide country’s clean energy transition policy. The Finkel Review is an “independent review into the future security of the national electricity market.” It was commissioned by the Council of Australian Governments after the state wide blackout in South Australia in September last year. Of the four agendas, Lower Emissions was last on the list after Increased Security, Future Reliability and Rewarding Consumers. But will this be enough spark to light the way to a future of clean energy?

Backchat spoke to clean energy analytics & communications consultant Ketan Joshi, about why this topic is at a gridlock.

“There is less of a focus on emission reductions … it could’ve actually been a lot more ambitious … closer in line with our Paris targets.”

With the flick of a switch: how does the room ‘get lit’?

The National Electricity Market is a privatised network that runs forty kilometres of transmission lines across eastern Australia through Queensland, New South Wales, Victoria, Australian Capital Territory and Tasmania. It supplies over nine million consumers and was valued at 11.7 billion dollars in wholesale revenue, at the time the Review was conducted in May 2017. The Australian Energy Market Operator (AEMO) oversees NEM to monitor the levels of energy supplied and generated across the system and intervenes in case of power shortages or failures.

A power generator, (Exhibit A: the power plant Mr Burns runs in The Simpsons), produces electricity from a natural resource. The electricity that has been generated is then converted to a high voltage which allows transmission lines to efficiently carry it to a transformer for distribution. This high voltage electricity is then converted back to a low voltage at the second transformer and is transmitted to consumers. In 2016, the majority of the electricity generated was from technologies using a nonrenewable energy source: black coal (44.7 per cent). AEMO predicts that residential demand for energy will decrease by 16 per cent over the next 20 years. But manufacturers and other business sectors will increase their demands by approximately six per cent and and ten per cent, respectively.

How will we meet this demand but also achieve lower emissions?

Finkel’s review identifies the absence of a coherent and unified policy for the investment of Australia’s clean energy and emission reduction. The Review is the new climate change plan, but its focus doesn’t appear that specific.

The Review has been criticised for modelling its recommendations on the National Electricity Market as a functioning system that simply has not renewed its practises to align with the transitioning technologies and advances of the clean energy market. Contrary to this, with the price of electricity rising and a number of major power failures since its inception, the NEM has been winded and ultimately fallen short of achieving some of its principal objectives. Ketan Joshi attributes this to the lack of stable policy to encourage investment in renewable energy systems.

“The really huge factor on electricity bills is policy certainty. And that’s a really difficult thing to get across in a clear political message.”

The main policy in place at the moment is the Renewable Energy Target (RET) which acts as an incentive for retailers such as AGL or Origin Energy to buy a certain amount of the electricity it distributes from renewable energy generators. By 2020, 23.5 per cent of Australia’s electricity should be generated from clean energy sources such as wind, hydro or solar.

The amount of electricity retailers purchase is quantified in ‘Certificates.’ One Certificate is equal to one megawatt hour; one megawatt hour is the equivalent to the supply of  electricity used in approximately 300 homes in a single hour. The price of the Certificates fluctuate depend on market demand and supply. But recently the cost, per Certificate, to a retailer is more than the fine they would pay per certificate they fall short of reaching their annual renewable energy target.

What does Finkel think?

The “Blueprint for the Future” sets out a plan to ensure the security and reliability of a “world class electricity system”. But the most significant recommendation is the Review is the Clean Energy Target. The CET allows for a mix of technologies, even if they release emissions, as long as the overall “reduction trajectory” is achieved. Retailers that purchase electricity produced by wind and solar technologies would receive the most incentives. But electricity bought from plants using a mix of wind, solar and coal technologies is still acceptable at a reduced incentive.

Ketan Joshi said:

“It’s very similar to the existing policy we have at the moment which is the RET… the difference is this one potentially loops in coal and gas.”

“People who tend to be antagonistic towards regulation or government intervention kind of like the idea of incentives rather than the government saying, no, bad you can’t do that.”

In line with the Paris Agreement, Finkel recommends Australia’s emissions should be reduced by 28 per cent from 2005 by 2030. The Goldman Sach’s (GS2) report recommends that to uphold the Agreement, the country needs to reduce its emissions by 40 – 60 per cent in this time. In line with this, Ketan Joshi stresses that the Review should have focused on an emission intensive reduction as opposed to a clean energy target.

As the policy moves to be debated in parliament, we beg the question: why wouldn’t the government support this?

Ketan explains:

“…this pre-existing belief that coal will always always be cheaper no matter what the technology is and wind and solar will always, always be expensive.”

“The people who can’t get past the idea that renewable energy is now cheap and now an effective tool for replacing ageing coal fired power stations – they hold a strong position in power.”

To bring this all into perspective, Pauline Hanson and her One Nation Party have stated that they aren’t getting behind this one.

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