Next Generation: Solving Australia’s energy problems – Grattan Institute Report

By Jonathan Dyble
South Australia recently became the most expensive region in the world for power, as electricity prices rose to overtake Denmark following the latest...

South Australia recently became the most expensive region in the world for power, as electricity prices rose to overtake Denmark following the latest hike from the country’s major energy retailers.

“Australians have endured a decade of toxic political debates about climate change policy, South Australians suffered a state-wide blackout last year, consumers across the country are screaming about skyrocketing electricity bills, and energy companies are shutting down big coal-fired power stations,” said Tony Wood, Grattan Institute Energy Program Director.

With all this in mind, the country needs to take measures to solve its ongoing, ever-worsening energy problem.

This is provided in the report named Next Generation: the long term future of the National Electricity Market. Within this, the Grattan Institute calls for preparatory work in the sector on a capacity mechanism, designed to encourage investment into Australia’s energy industry to reduce the threat of shortages and blackouts.

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Capacity mechanisms are an administrative measure, designed ensure a desired level of supply is achieved. However, implementing this would merely be a short term solution, and Australia needs to look to sustainability in the long term.

“It is understandable that governments feel the need to ‘do something’. But the danger is they will rush in and make things worse. What Australia needs now is perspective, not panic,” Wood continues.

The report sets out a three-step policy in both understanding the country’s energy supply and implementing a capacity mechanism if necessary.

  1. The federal government should set out its energy ambitions based on the June 2017 Finkel Review aimed at using new clean energy targets to deliver lower power prices to consumers.
  2. The Australian Energy Market Operator should work alongside the Australian Energy Market Commission to produce an annual assessment that more readily looks at the future adequacy of the generation of energy supply.
  3. If the Energy Security Board deems that energy shortages seem at all likely, then the capacity mechanism should be implemented.

“This pragmatic, planned approach offers the best prospect of affordable, reliable, secure and sustainable power for Australians,” Wood concludes.

This plan has the long-term future of the country in mind, attempting to gauge energy shortages before they occur, whilst also preventing panic from the government in the face of potential blackouts in the short term.

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