Strategic overview:
The course of Australian energy policy and regulation would inevitably alter following the change in Federal Government in May last year. Since then, the state and Federal governments have become aligned on energy policy, largely removing energy as a perennial football in Australian politics. The alignment manifests in various state and Federal schemes and targets to boost renewable investment in Australia, such as:
- Federal legislated target of 43% reduction in greenhouse gas emissions from 2005 levels by 2030 and net zero by 2050
- Adding an emissions reduction objective to national energy laws
- Federal Government underwriting transmission investment up to $20b
- New South Wales Infrastructure Roadmap to add enough renewable generation to produce 33,600 GWh per year by 2030
- Victorian renewable energy targets of 50% by 2030 and an energy storage target of 6.3 GW by 2035
- Queensland Energy and Jobs Plan to achieve 70% renewable energy generation by 2032
These targets provide a stable signal for private investors in that the Australian governments are serious about the renewable energy transition.
Recent impactful changes:
While the governments are aligned on facilitating the energy transition, converting this vision into an operational reality poses many challenges. Regulators and market bodies grapple with these challenges through new and amended policies and regulations, of which recent impactful changes include:
| Change | Why is this important |
| Addressing transmission congestion through a voluntary Congestion Relief Market | This could provide congestion relief at key points in the transmission network. An accompanying Priority Access mechanism will, in certain circumstances, prioritise bidding order according to queue numbers. |
| Introducing new NEM spot market caps | The new caps will increase the extent of market volatility, which simultaneously will increase arbitrage opportunities for storage. |
| Introducing some form of capacity payments | As the auctions will be run on a state-wide basis, the payments will augment the state priorities. For example, the capacity payments will boost the NSW LTESA firming capacity auction. |
| Creating a $12/GJ ‘price anchor’ to apply to future east coast gas sales | Exemptions to the price anchor are available for producers willing to make additional domestic supply commitments. This should mitigate gas shortfall risks if the regime does not discourage new domestic supply. |
| Ditching the proposed Operational Security Mechanism for bilateral security arrangements | After years of development, removing the OSM may suggest a preference for more ‘interventionist’ rather than market-making solutions. This could be a simpler solution at the expense of transparency. |
Free Congestion Relief Market webinar access:
Cornwall Insight Australia recently delivered a webinar on the Congestion Relief Market, where our experts discussed the impact on transmission congestion and generator bidding behaviour. You can request access to the webinar recording here.
Energy Market Alerts:
Energy regulations and policies are constantly changing, although some changes are more impactful than others.
This is where Cornwall Insight Australia can help. Our Energy Market Alert service provides succinct reports on the key regulatory and policy changes that will affect the industry. We have issued over 20 energy market alerts this year already, saving our clients countless hours scouring and analysing lengthy regulatory reports. By distilling the key information and concepts, we enable our clients to make more informed decisions.
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