Recent figures released by the Australian Energy Council show that coal-fired generation (both brown and black coal) makes up seventy-eight percent of electricity generation across the NEM. This is followed by gas, which accounts for almost ten percent.
The majority of Australia’s existing coal-fired power stations are old and inefficient and will need to be retired or replaced in coming decades. The inefficiencies of Australia’s electricity generation mean the country produces more greenhouse gas emissions per unit of electricity than almost any other developed country. (Source: Climate Council 2014)
Australian policy on the transition to clean and renewable power generation has undergone many changes. A decade of inconsistent policy has fuelled uncertainty in the energy sector; from the Gillard Labor Government’s Carbon Pricing Scheme which came into effect on 1 July 2011 – dubbed by its critics as a “carbon tax” – and subsequently repealed by the Abbott Government in mid-2014, to the Renewable Energy Target in its varying forms over the years.
Australia is blessed with some of the best renewable energy resources in the world, with world-class wind, solar, marine, hydro and bioenergy sources. Its proven capability for continued innovation places it well to integrate these and other emerging solutions into its electrical systems.
The Paris Agreement
In 2015 Australia joined 174 other countries in signing the Paris Agreement. The Paris agreement cemented Australia’s commitment to carbon reduction and limiting the global temperature rise to below 2°C.
The graph below highlights the sharp transition required to meet the Paris climate target.
The Renewable Energy Target (RET)
The RET is a Commonwealth Government scheme to increase the proportion of electricity generated in Australia from renewable sources, to reduce the emissions of greenhouse gases from electricity generation and to promote the development of a renewable energy industry in Australia.
The policy is designed to ensure that at least 33,000 Gigawatt-hour (GWh) of Australia’s electricity comes from renewable sources by 2020.
Under the scheme, RET-liable entities must purchase a specified percentage of their electricity from renewable sources each year; liable entities under the RET are large purchasers of electricity such as electricity retailers and large industrial users.
The RET is currently split into two separate targets: the large-scale RET (or LRET), for large renewable electricity developments like wind and solar farms, and the small-scale renewable energy scheme (the SRES) for small technology installations like rooftop solar and solar hot water heaters. Liable entities have obligations to purchase renewable energy from both schemes
About half of the projects which are under construction or started in 2017 under the RET are large-scale solar, due to a plunge in costs over the last few years. Support from the Australian Renewable Energy Agency (ARENA) and innovative finance from the Clean Energy Finance Corporation (CEFC) have pushed the price of large-scale solar down to almost half what it was just a couple of years ago.
The table below shows the recent generation split across each NEM/SWIS State of Australia
Live Supply & Demand: Tue 20 Feb, 08:00 (NEM Time) (Source: http://reneweconomy.com.au/nem-watch/)
The National Energy Guarantee (NEG)
In October 2017, the Turnbull Government accepted the recommendation of the Energy Security Board (ESB) for a National Energy Guarantee (NEG). The NEG is designed to deliver more affordable and reliable electricity while meeting Australia’s international commitments.
The Guarantee (NEG) is made up of two parts that will require energy retailers across the National Electricity Market to deliver reliable and lower emissions generation each year.
- A reliability guarantee will be set to deliver the right level of dispatchable energy (from ready-to-use sources such as coal, gas, pumped hydro and batteries) needed in each state. It will be set by the Australian Energy Market Commission (AEMC) and Australian Energy Market Operator (AEMO).
- An emissions guarantee will be set to contribute to Australia’s international commitments. The level of the guarantee will be determined by the Commonwealth and enforced by the Australian Energy Regulator (AER).
The Government will now work with the ESB and the states through COAG to implement the National Energy Guarantee
Cost Reduction Strategies
Getting expert advice on the right time to go to market is vital in any cost reduction and risk management strategy. We typically look at a client’s portfolio at least six to twelve months before contract expiry to maximise the chance of a competitive tendering process, and in some occasions going to market more than once. Knowing the right time to hold off is just as important as being able to fast track decision makers when a good offer is on the table. Either of those scenarios requires a great deal of preparation and a strong relationship with an energy market expert like Sustainable Energy Solutions.
Managing risk and price exposure in a volatile market
Electricity wholesale prices in the emerging power markets are volatile, a consequence of the unique physical attributes of electricity production and distribution. Strategic electricity procurement and timely contract negotiations are one of the first steps any business should take on their energy management journey. Close examination of the network tariffs and metering charges is equally as important. Businesses can also achieve sustainable long-term savings through energy efficiency initiatives as improvements in technology continue to drive the cost down.