Good energy directions, watch for potholes

“Stronger cooperation and coordination between Australia’s Energy Ministers is a good sign for a cheaper, cleaner and more reliable energy system,” Innes Willox, Chief Executive of national employer association Ai Group said today.

“Building our way out of the current energy crisis and into a new competitive advantage in a net zero emissions world will be a huge undertaking. It will require not just huge new energy facilities, massive upgrades in homes and factories across the nation, and the energy networks to connect them up; but rapid growth of the supply chains for the equipment, materials and minerals involved.

“Those tasks will be much easier if Australia’s governments continue to show the strong cooperation we saw today. Developing a new energy transition agreement, building emissions goals into energy governance, and coordinating to develop stronger local supply chains should be very positive steps.

“There are also pitfalls to watch for, however. The wording of the new National Energy Objectives is critical and will need intense consultation to ensure it reflects cost, equity and emissions goals clearly and coherently. Building local supply chains should involve scaling up to solve huge local and global needs, not looking inward for 100% local content on everything. There is opportunity for all, but decisions on where to locate new production of equipment and materials will test the relationships between Australia’s governments.

“Taking development of the controversial Capacity Mechanism under closer Ministerial oversight should on balance be helpful. A major reason why something like a Capacity Mechanism is needed is that Ministers have evidently lost confidence that the existing market design will drive sufficient investment to maintain reliability. Ministers may be the best judge of what supplementary mechanism will give them sufficient confidence. The resulting proposals will also need to answer industry concerns about the cost of potential gold-plating in the pursuit of excessively strict reliability goals.

“Speedier development of badly needed new transmission lines, with firm timetables for business and government to work towards, is welcome – particularly with Commonwealth finance to reduce the costs and risks to energy users. With planning and financial barriers falling, social license shapes up as the biggest blocker. Communities near proposed projects need to be treated with respect. But we will all pay a high price if we cannot build the new energy system we need before our ageing coal fleet fails.

“On the gas crisis Ministers have agreed a range of helpful steps for transparency and better winter planning. These should help reduce the risk that we’re caught out in future. It does not appear that any of these steps will shift the fundamentals that shape the next few years of high gas prices, however. International pressures remain severe.

“Further decisions by the Commonwealth on the gas trigger will be needed, as will a new push from all jurisdictions to support energy users to raise energy efficiency, improve energy management and substitute natural gas with electricity, biogas and hydrogen,” Mr Willox said.

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