Forging a Path to Australia's Renewable Energy Future

Forging a Path to Australia's Renewable Energy Future

The Senate Select Committee into the Resilience of Electricity Infrastructure in a Warming World Stability and Affordability: Forging a path to Australia’s renewable energy future April 2017 © Commonwealth of Australia 2017 ISBN 978-1-76010-538-9 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/ Printed by the Senate Printing Unit, Parliament House, Canberra. Committee membership Committee members Senator Sarah Hanson-Young , Chair SA, AG Senator Jenny McAllister, Deputy Chair NSW, ALP Senator Chris Back WA, LP Senator Jonathon Duniam TAS, LP Senator Alex Gallacher SA, ALP Senator Malcolm Roberts QLD, PHON Senator Anne Urquhart TAS, ALP Participating member Senator Nick Xenophon SA, NXT Committee secretariat Dr Patrick Hodder, Acting Secretary Dr Jon Bell, Principal Research Officer Mr CJ Sautelle, Principle Research Officer Ms Aleshia Westgate, Senior Research Officer Ms Erin Pynor, Senior Research Officer Ms Sophie Wolfer, Research Officer Ms Dee Oxley, Administrative Officer PO Box 6100 Parliament House Canberra ACT 2600 T: +61 2 6277 3583 F: +61 2 6277 5719 E: [email protected] W: www.aph.gov.au/joint_corporations iii Table of Contents Committee membership ................................................................................... iii Acronyms and abbreviations ...........................................................................vii Executive summary ............................................................................................ ix Recommendations ............................................................................................. xv Chapter One ........................................................................................................ 1 Introduction .............................................................................................................. 1 Conduct of the inquiry ............................................................................................ 1 Note on references .................................................................................................. 2 Structure of the report ............................................................................................. 2 Terminology ........................................................................................................... 2 Other inquiries ........................................................................................................ 3 Chapter 2............................................................................................................ 13 Background ............................................................................................................. 13 Introduction .......................................................................................................... 13 A warming world .................................................................................................. 13 Implications of climate change for electricity networks ...................................... 14 Paris Climate Agreement ...................................................................................... 16 Australia's Electricity Generation ......................................................................... 17 The National Electricity Market (NEM) .............................................................. 25 Issues facing the NEM .......................................................................................... 30 Chapter 3............................................................................................................ 31 Resilience from storage technologies and distributed generation ..................... 31 Introduction .......................................................................................................... 31 Changing patterns of electricity supply and demand ........................................... 31 Integrating renewables into the electricity system ............................................... 32 New opportunities arising from storage technologies .......................................... 35 Types of storage technologies .............................................................................. 36 Ancillary services provided by a diversity of energy storage systems ................ 48 Benefits arising from decentralised electricity generation ................................... 50 v Committee view .................................................................................................... 54 Chapter 4............................................................................................................ 57 Policy and regulatory measures ............................................................................ 57 Introduction .......................................................................................................... 57 The business case for policy certainty on a carbon price signal .......................... 57 The renewable energy target ................................................................................ 65 Market rule and regulatory changes to incentivise the deployment of storage technologies .......................................................................................................... 66 Economic opportunities arising from deployment of renewable energy and energy storage technologies ................................................................................. 77 Dissenting report by Labor Senators .............................................................. 81 Coalition Senators' Dissenting Report ............................................................ 91 Dissenting Report from Senator Roberts ....................................................... 99 Senator Nick Xenophon's Dissenting Report to the .................................... 147 Appendix 1 ....................................................................................................... 153 Submissions, additional information, tabled documents and answers to questions on notice ................................................................................................ 153 Appendix 2 ....................................................................................................... 157 Public hearings and witnesses ............................................................................. 157 Acronyms and abbreviations ABS Australian Bureau of Statistics ACT Australian Capital Territory AEMC Australian Energy Market Commission AEMO Australian Energy Market Operator AER Australian Energy Regulator AGL AGL Energy Limited ANU Australian National University ARENA Australian Renewable Energy Agency ATSE Australian Academy of Science, Technology and Engineering CCGT Combined Cycle Gas Turbine COAG Council of Australian Governments COP21 Paris Climate Conference—21st Conference of the Parties CSIRO Commonwealth Scientific and Industrial Research Organisation CSP systems Concentrating Solar-thermal Power systems Genex Genex Power, Australian public company GW gigawatt MW megawatt MWh megawatt hour NEM National Electricity Market NSW New South Wales OECD Organisation for Economic Co-operation and Development PCM Phase Change Materials PV Photovoltaic RET Renewable Energy Target TCS Thermo-Chemical Storage TES Thermal Energy Storage TESS-EC Thermal Energy Storage System – Energy Consumer TESS-GRID Thermal Energy Storage System – bulk grid storage technology TESS Thermal Energy Storage System TIPSA Torrens Island Power Station near Adelaide WEM Wholesale Electricity Market viii Executive summary This inquiry has unfolded against a background of power shortages and black-outs, extreme weather events such as record heat waves and storms, and ongoing climate change denialism within the ranks of the Coalition government that has caused an abject failure on climate and energy policy at the national level. A key contributor to the current situation was the decision by the Coalition to divorce energy policy from climate policy and remove a carbon price signal. Let us be clear: there never was any real-world rationale for the abolition of a carbon price. Instead, it was done for ideological reasons and base political gain. The schism wrought in Australian politics over climate and energy policy by the Coalition has been disastrous for political discourse in this country and is now having severe adverse economic, social and environmental consequences for the nation. Australia's existing electricity network was built to support the outdated and dirty coal-fired power stations. The world is moving rapidly to decarbonise electricity supply and the current owners of coal-fired power stations were quite emphatic in telling this committee (and the concurrent Senate Environment and Communications References Committee inquiry into the retirement of coal-fired power stations) that they are getting out of coal and have no intention of building any more coal-fired power stations. By definition, therefore, coal has no role to play in a secure energy future. Coal-fired power stations are being closed down and coal is in structural decline. The market has moved. Investors have now priced climate risk into their calculations about the sources of future electricity generation. Investors know that a price on carbon is inevitable, but the debacle around climate and energy

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