Encouraging reset on energy but specifics are urgent

“Re-establishing strong energy cooperation between the Commonwealth and the States is the most important outcome of yesterday’s Energy Ministers meeting,” Innes Willox, chief executive of national employer association Ai Group said.

Business, community and housing groups urged energy ministers to agree on “a speedier move” away from natural gas as a solution to Australia’s power crisis, before the federal and state politicians met on Thursday (9 June) for the emergency talks.

Following the historic summit the Federal Climate Change and Energy Minister, Chris Bowen, outlined three key steps from the meeting, which included: 

• Developing a capacity mechanism, which prioritises storage and renewable energy
• A gas procurement and storage plan to be coordinated by the Australian Energy Market Operator (AEMO)
• A National Transition Plan, which has consensus from the federal government and all states and territories

Mr Willox said there is “clearly goodwill among Australia’s energy ministers” and said it is needed to maintain the “strong foundation as the hurricane of high energy prices strikes Australia over this winter – and the years to come”.

“Amidst soaring wholesale prices for power and gas, and with more and more energy users feeling the pinch on their bills, coordinated action is urgent,” he said.

“The meeting indicated some sensible directions for action.

 “Accelerating new clean energy is important to reduce our exposure to sky-high international coal and gas prices. Flagging aggregation and coordination of these investments to manage supply chain barriers is a new direction for policy and a major change from the fragmentation of recent years.”

However, Mr Willox said a capacity mechanism does not directly address current affordability challenges, which fundamentally relate to fuel costs.

“Speeding the growth of renewables entails faster growth of flexible resources to firm the system. An appropriately designed capacity mechanism that incentivises efficient assets to make the transition work, without loading excessive costs on energy users, would be helpful. Industry will fully participate as the design progresses,” he said.

“The agreement to re-assess the supply and demand balance in the gas market is vital. The last assessment came before the war in Ukraine. It expected vastly lower prices than those we now face; saw gas demand drifting down; and anticipated that LNG imports would play an ever bigger role in balancing the market. Everything has now changed and a fresh look is needed as the basis for the new plans and measures Ministers also asked for. Accelerating demand-side gas transition should be prominent in this new work.

“Industry never expected that yesterday’s meeting would solve the crisis, and indeed it did not. It is a start. The next meeting in July will need to sign off on more specifics across accelerating new energy supply and speeding demand-side efficiency, energy management and fuel switching. And in the meantime, all levels of government will need to get financial assistance flowing to those energy users most at risk.”