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Interim Report: Retirement of Coal Fired Power Stations The Senate Environment and Communications References Committee Retirement of coal fired power stations Interim report November 2016 © Commonwealth of Australia 2016 ISBN 978-1-76010-492-4 Committee contact details PO Box 6100 Parliament House Canberra ACT 2600 Tel: 02 6277 3526 Fax: 02 6277 5818 Email: [email protected] Internet: www.aph.gov.au/senate_ec This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License. The details of this licence are available on the Creative Commons website: http://creativecommons.org/licenses/by-nc-nd/3.0/au/. This document was printed by the Senate Printing Unit, Parliament House, Canberra Committee membership Senator Larissa Waters, Chair AG, QLD Senator David Bushby, Deputy Chair LP, TAS Senator Anthony Chisholm ALP, QLD Senator Sam Dastyari ALP, NSW Senator Jonathon Duniam LP, TAS Senator Anne Urquhart ALP, TAS Participating members for this inquiry Senator Jane Hume LP, VIC Senator James Paterson LP, VIC Committee secretariat Ms Christine McDonald, Committee Secretary Ms Ann Palmer, Committee Secretary Mr CJ Sautelle, Principal Research Officer Ms Sarah Redden, Principal Research Officer Ms Margie Morrison, Senior Research Officer Ms Ophelia Tynan, Research Officer Ms Kirsty Cattanach, Research Officer Ms Margaret Jones, Administration Officer Ms Michelle Macarthur-King, Administration Officer iii TABLE OF CONTENTS Committee membership ................................................................................... iii List of recommendations ..................................................................................vii Chapter 1 .............................................................................................................. 1 Referral and conduct of the inquiry ....................................................................... 1 Referral ................................................................................................................... 1 Conduct of the inquiry ............................................................................................ 2 Note on references .................................................................................................. 2 Acknowledgement .................................................................................................. 2 Structure of the report ............................................................................................. 2 Chapter 2.............................................................................................................. 3 Electricity markets and the role of coal fired power stations ............................. 3 Introduction ............................................................................................................ 3 Electricity markets in Australia .............................................................................. 3 Meeting our Paris Agreement obligations .............................................................. 9 Chapter 3............................................................................................................ 23 Options for the retirement of coal fired power stations...................................... 23 'Barriers to exit' and need for policy certainty ...................................................... 23 Leaving retirement decisions solely to industry and market forces ..................... 26 Policy mechanisms based on direct regulation ..................................................... 28 Market-based mechanisms ................................................................................... 32 Chapter 4............................................................................................................ 39 Options for managing the transition away from coal fired power stations ...... 39 Need for a national transition plan ....................................................................... 39 A 'just transition' for workers and communities ................................................... 42 Chapter 5............................................................................................................ 49 Committee view....................................................................................................... 49 Reality of the transition away from coal fired power generation ......................... 49 Need for an orderly closure process to encourage price stability and investment certainty ................................................................................................................ 49 Coalition Senators' Interim Dissenting Report .............................................. 53 Appendix 1 ......................................................................................................... 65 Submissions, tabled documents and answers to questions on notice ................ 65 Appendix 2 ......................................................................................................... 69 Public hearings ........................................................................................................ 69 List of recommendations Recommendation 1 5.10 The committee recommends that the Australian Government adopt a comprehensive energy transition plan, including reform of the National Electricity Market rules. Recommendation 2 5.11 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 Energy Council. Recommendation 3 5.12 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. Recommendation 4 5.13 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. vii Chapter 1 Referral and conduct of the inquiry Referral 1.1 On 13 October 2016, the Senate referred the following matter to the Environment and Communications References Committee for inquiry and interim report by 28 November 2016 and final report by 1 February 2017: (a) the experience of closures of electricity generators and other large industrial assets on workers and communities, both in Australia and overseas; (b) the role that alternative mechanisms can play in alleviating and minimising the economic, social and community costs of large electricity generation and other industrial asset closures, drawing on experiences in Australia and overseas; (c) policy mechanisms to encourage the retirement of coal fired power stations from the National Electricity Market, having regard to: (i) the 'Paris Agreement' to keep global warming below 2 degrees celsius, and ideally below 1.5 degrees celsius, (ii) the state and expected life span of Australia's coal fired power plants, (iii) the increasing amount of electricity generated by renewable energy and likely future electricity demand, (iv) maintenance of electricity supply, affordability and security, and (v) any other relevant matters; (d) policy mechanisms to give effect to a just transition for affected workers and communities likely impacted by generator closures, as agreed in the 'Paris Agreement', including: (i) mechanisms to ensure minimal community and individual impact from closures, and (ii) mechanisms to attract new investment and jobs in affected regions and communities; (e) the appropriate role for the Federal Government in respect of the above; and 1 (f) any other relevant matters. 1 Journals of the Senate, 2016, No. 11 (13 October 2016), p. 329. 2 Conduct of the inquiry 1.2 In accordance with its usual practice, the committee advertised the inquiry on its website and wrote to relevant individuals and organisations inviting submissions by 10 November 2016. The committee continued to accept submissions after this date. 1.3 The committee has received and processed 103 submissions. These submissions, together with other information authorised for publication by the committee, are listed at Appendix 1. The public submissions are also available on the committee's website at www.aph.gov.au/senate_ec. 1.4 The committee has held public hearings for this inquiry in Canberra on 9 November 2016 and in Melbourne on 17 November 2016. A list of witnesses who appeared at the hearings is at Appendix 2. Note on references 1.5 In this report, references to the committee Hansard transcripts are to the proof transcripts. Page numbers may vary between proof and official Hansard transcripts. Acknowledgement 1.6 The committee thanks all of the individuals and organisations that contributed to the inquiry. Structure of the report 1.7 This interim report comprises five chapters. The matters covered in the remaining chapters of the report are outlined below: • Chapter 2 outlines the electricity market in Australia, the contribution of coal fired power stations in electricity generation and the role of coal fired power stations in meeting emissions targets; • Chapter 3 discusses potential mechanisms for the retirement of coal fired power stations; • Chapter 4 discusses the role of 'just transition' policies and options for transition management; and • Chapter 5 sets out the committee view and recommendations.
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