The energy minister, Josh Frydenberg, says the Turnbull government
will not allow carbon trading in the electricity sector despite the high
likelihood that the looming Finkel review will endorse an emissions
intensity scheme as one of the better policy options that could be
adopted.
Frydenberg told Sky News on Monday the government would not go down the path of an emissions intensity scheme (EIS), despite a host of industry and environment groups arguing over the past few months that trading in Australia’s energy sector would be an effective policy mechanism to reduce emissions at least cost to households and businesses.
Frydenberg said a trading scheme punished “a number of the thermal generators at a time when we need to stabilise the system – so we’re not going down the path of an EIS”.
The federal energy minister’s comments appear to be an effort to get out in front of the final Finkel review of the national electricity system, which will be handed to the Council of Australian Governments on 9 June.
Industry sources have told Guardian Australia the chief scientist, Alan Finkel, is more than likely to stick with the implicit endorsement he gave to an emissions intensity trading scheme for the electricity sector in his preliminary report, which was given to state and federal ministers six months ago.
Based on briefings Finkel and his team have held with a range of
groups in recent weeks, stakeholders are anticipating the chief
scientist will keep the option of an intensity trading scheme on the
table despite the Turnbull government’s public opposition – but also
propose a number of alternatives.
There is a widespread expectation that Finkel will use his final report to float a new low-emissions target along the lines John Howard proposed back in 2007. Such a scheme would work in practice as a technology neutral renewable energy target.
The Howard proposal required that a percentage of electricity be generated annually from “low-emissions” sources, which was defined in 2007 as emitting fewer than 200kg of greenhouse gas per megawatt of electricity generated.
Such a recommendation would align with prevailing political sentiment from the government. Both Malcolm Turnbull and Frydenberg have made much of technology neutrality in energy policy in recent months.
Separately to the Finkel process, they have also flagged changing the investment rules of the Clean Energy Finance Corporation to allow it to invest in more technologies, including high efficiency, lower emissions (HELE) coal-fired plants.
Finkel is also expected to recommend in his final report changing some of the existing rules governing the national electricity market, including current regulations where generators bid to supply power to the national market in five-minute intervals but prices are determined over 30-minute intervals.
Critics of the current system say it is open to gaming by generators, who can create price spikes at the opening of a trading period before lowering their bids at the tail end of the interval – which has the practical effect of increasing wholesale prices.
Other regulatory measures believed to be under consideration by the chief scientist would be steps to create a market for fast frequency response, which would be a positive development for battery technologies and storage.
Some stakeholders say the chief scientist may also make some recommendations about forward-looking regulations to phase out coal-fired electricity generation.
Labor’s climate change spokesman, Mark Butler, on Monday criticised Frydenberg for ruling out a trading scheme supported by everyone from BHP to the Australian Energy Markets Commission.
“This would all be funny if it wasn’t the case that Australians are facing an energy crisis, wholesale electricity prices have doubled under their watch, the gas market is in crisis, emissions are once again growing and there is a private sector investment strike in new generation,” Butler said Monday.
“It would be funny but instead it’s a disgrace.”
Frydenberg told Sky News on Monday the government would not go down the path of an emissions intensity scheme (EIS), despite a host of industry and environment groups arguing over the past few months that trading in Australia’s energy sector would be an effective policy mechanism to reduce emissions at least cost to households and businesses.
Frydenberg said a trading scheme punished “a number of the thermal generators at a time when we need to stabilise the system – so we’re not going down the path of an EIS”.
The federal energy minister’s comments appear to be an effort to get out in front of the final Finkel review of the national electricity system, which will be handed to the Council of Australian Governments on 9 June.
Industry sources have told Guardian Australia the chief scientist, Alan Finkel, is more than likely to stick with the implicit endorsement he gave to an emissions intensity trading scheme for the electricity sector in his preliminary report, which was given to state and federal ministers six months ago.
There is a widespread expectation that Finkel will use his final report to float a new low-emissions target along the lines John Howard proposed back in 2007. Such a scheme would work in practice as a technology neutral renewable energy target.
The Howard proposal required that a percentage of electricity be generated annually from “low-emissions” sources, which was defined in 2007 as emitting fewer than 200kg of greenhouse gas per megawatt of electricity generated.
Such a recommendation would align with prevailing political sentiment from the government. Both Malcolm Turnbull and Frydenberg have made much of technology neutrality in energy policy in recent months.
Separately to the Finkel process, they have also flagged changing the investment rules of the Clean Energy Finance Corporation to allow it to invest in more technologies, including high efficiency, lower emissions (HELE) coal-fired plants.
Finkel is also expected to recommend in his final report changing some of the existing rules governing the national electricity market, including current regulations where generators bid to supply power to the national market in five-minute intervals but prices are determined over 30-minute intervals.
Critics of the current system say it is open to gaming by generators, who can create price spikes at the opening of a trading period before lowering their bids at the tail end of the interval – which has the practical effect of increasing wholesale prices.
Other regulatory measures believed to be under consideration by the chief scientist would be steps to create a market for fast frequency response, which would be a positive development for battery technologies and storage.
Some stakeholders say the chief scientist may also make some recommendations about forward-looking regulations to phase out coal-fired electricity generation.
Labor’s climate change spokesman, Mark Butler, on Monday criticised Frydenberg for ruling out a trading scheme supported by everyone from BHP to the Australian Energy Markets Commission.
“This would all be funny if it wasn’t the case that Australians are facing an energy crisis, wholesale electricity prices have doubled under their watch, the gas market is in crisis, emissions are once again growing and there is a private sector investment strike in new generation,” Butler said Monday.
“It would be funny but instead it’s a disgrace.”
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