Energy ministers approve 49 out of 50 Finkel recommendations

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Australian energy ministers have agreed to implement all but one recommendation of the Final Report of the Independent Review into the Future Security of the National Electricity Market at the 12th COAG Energy Council Meeting.

The review, also known as the Finkel Report, was released by Australia’s Chief Scientist Alan Finkel on 9 June 2017 for government consideration.

The government’s response to the report recommendations aims to secure reliable and affordable energy for Australians, while reducing emissions.

The one recommendation that was not agreed upon was the implementation of a Clean Energy Target.

The COAG Energy Council did not support tasking the AEMC to develop design options for implementation of a Clean Energy Target, with the Council noting that Queensland, Victoria, South Australia and the Australian Capital Territory will separately commission the AEMC to do further work in this area.

Some of the actions that were agreed upon in response to the report’s recommendations included the AEMO putting in place actions to ensure the system is ready for the upcoming summer.

AEMO is already conducting an independent audit of its plan to manage the NEM through this period and is working closely with generators to move planned outages to non-peak demand periods, Transmission Network Service Providers (TNSPs) to reschedule maintenance outages and securing additional resources to meet demand on the hottest days.

Ministers also agreed to establish an Energy Security Board (ESB), a new body comprising an independent Chair, Deputy Chair and the heads of the AEMC, AEMO and the AER.

Other actions included:

  • The introduction of energy security requirements for TNSPs and generators, and updated standards to ensure generators are sufficiently resilient, to make the system better able to withstand disruptions like generator outages or interconnector failures
  • New ‘Generator Reliability Obligations’ will bring more dispatchable capacity to the market and minimise the system reliability challenges flowing from an increasing share of intermittent renewable energy generation
  • Efforts to put downward pressure on price, including:
    • Providing greater transparency on the price and availability of long-term electricity retail contracts for large consumers who are sensitive to reliability and affordability issues
    • Giving consumers greater real-time control over their energy consumption data
    • Providing governments greater visibility of retail electricity prices, retail margins and factors affecting prices

In terms of gas market reforms, ministers discussed several of the Finkel recommendations and how they will respond.

In particular, the implementation of the Australian Domestic Gas Security Mechanism (ADGSM), which allows the Commonwealth to intervene, if necessary, to ensure an adequate supply of gas is available to the domestic market.

In pipeline reform, ministers agreed for AEMO to operate the Capacity Trading Platform and the Day-Ahead Auction.

The meeting’s communique states that, “Ministers directed the Gas Market Reform Group to ensure the information disclosure and commercial arbitration rules commence by 1 August 2017. Ministers tasked the Senior Committee of Officials to report by the end of the year on further regulatory options to strengthen pipeline regulation.”

Industry response

The Australian Pipelines and Gas Association (APGA) slammed the proposed pipeline reforms saying they are “dismayed that Energy Ministers have brought forward reforms to pipeline operations and foreshadowed even more regulation in what is a small part of the energy sector without sufficient consideration of the consequences.”

APGA Chief Executive Peter Greenwood said, “This is merely the latest in a series of decisions on pipeline operations that have been introduced, or are in the process of being introduced, in a very compressed timeframe.”

“Indeed, the various reforms being rushed through have significant potential to undermine each other. For example, the effectiveness of the proposed capacity trading platform that will enable shippers to trade spare capacity may be threatened by the day-ahead auctions.

“We understand the very difficult circumstances energy ministers have in trying to devise a coherent energy policy in a time of rapidly-changing technology complicated by the transition to lower carbon emissions.

“However, tinkering with various elements of the system without any vision of what it should look like as a whole and then rushing through changes with insufficient time for sensible consideration of how they will work and what will be the cumulative impact of those decisions is a recipe for disaster,” Mr Greenwood said.

Energy Networks Australia CEO John Bradley welcomed Ministerial decisions to implement most of the Finkel Review recommendations, but noted the hard work was yet to be done.

“Ministers have delivered major reforms with Finkel recommendations such as the establishment of an Energy Security Board, energy security requirements and Generator Reliability obligations,” Mr Bradley said.

“Time is running out for a national approach to carbon policy and the exploration and development of gas supplies – which are vital to address energy costs for households and businesses.”

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