Former mastermind behind carbon pricing, Greg Combet, supports proposed fixes for Australia's energy crisis

The former federal minister who oversaw the introduction of carbon prices in Australia has backed calls for policies such as insurance to help fix the crisis plaguing the country’s largest power grid.

Key points:

• Former climate change minister Greg Combet has backed plans for capacity markets to help repair networks
• The proposal was pursued in the midst of skyrocketing prices and warnings of blackouts in the national electricity market
• Mr Combet said the policy was needed to help Australia transition to 100 per cent renewable energy

Greg Combet, a former union leader who served as climate change minister in the Gillard government, said ideology needed to be removed from debates about how to solve problems affecting national electricity markets.

Mr Combet said businesses and households – especially the vulnerable – were suffering amid skyrocketing prices and rolling blackout warnings as the system struggled to cope with demand.

While he blamed the “chaos” at the feet of the previous Coalition government, he said opposition to the proposed capacity market for energy would only prolong the problem.

The coalition rejected the comments, saying Australia became the world leader in renewable energy investment under the previous administration.

Under the capacity market, energy providers — including generators and storage owners — are paid to be available when the system needs it, usually during times of grid stress.

The sudden exit of the Hazelwood power station in 2017 sparked upheaval in the national electricity market.(AP)

Large users, such as manufacturers, can also be paid to reduce demand or disable completely when needed.

Providers that fail to provide capacity when called upon can face heavy penalties.

Policy needed to fix the ‘mess’

Despite Federal Energy Secretary Chris Bowen’s support, the proposal for a capacity market has come under fire from renewable energy advocates who say it will extend the life of coal-fired assets.

Mr Combet, now chairman of the industry super fund IFM Investors, said a well-designed capacity market would help keep the lights on during the transition to renewable energy.

He also said such policies would not stop coal-fired power plants from shutting down, which were not well equipped to deal with intermittent surges in renewable energy levels.

Wind turbine from Silverton Wind Farm.(AAP: Mick Tsikas)

“Ultimately, governments, regulators, everyone involved in industry, have a responsibility to ensure businesses and households have secure access to their energy needs,” said Mr Combet.

“And that’s what the capacity mechanism is trying to achieve.

“In some ways, it’s not an ideal policy requirement because it reflects years of failure.

“However, it is a mechanism that can now ensure that there is much better reliability for supply security.

“And it’s getting late. So that’s something I’d like to see come in.”

Market capacity ‘not a solution’

Tristan Edis of research and advisory firm Green Energy Markets said changes were needed at NEM but he thought the capacity market was not the solution.

Mr Edis said the capacity market risks extending the life of coal-fired power plants and wasting money on assets that would make it harder for governments to meet their targets for net zero emissions.

Renewable energy advocates say schemes to encourage battery use should take precedence.(Provided: Victorian Department of Energy, Environment and Climate Change)

In the long term, he said, the government needs to think “bigger”, for example by increasing the energy efficiency of Australian homes which require large amounts of power for heating and cooling.

But in the short term, he said measures should focus on ensuring certainty around the time frame in which coal plants will exit to provide a clear signal to investors looking to build replacement capacity.

“We are suffering from a situation of deep uncertainty and we have suffered from this ever since Tony Abbott came on the scene,” Edis said.

“But the problem is now much more pressing because we are already 10 years into the future and coal generators are getting old and less reliable and gas is becoming much more expensive.”

Mr Edis said the capacity market would require a major and expensive redesign of the system, arguing there were “cheaper and less disruptive” options available.

He said the batteries would be able to meet most of the challenges associated with renewables by releasing their output during peak nights when solar power is down.

For a longer period, he said special policies or incentives could be put in place to encourage investment.

‘Bring out the ideology’

According to Mr Combet, Australia is destined to become a renewable energy superpower, given its abundant wind and solar power supplies, vast land resources and skilled workforce.

But he said switching to an electricity system that uses 100 percent renewable energy would take time and it was important not to let ideology get in the way of pragmatism.

On leaving politics in 2013, Mr Combet lamented the collapse of the Labor Party’s carbon pollution reduction scheme in 2009, when the Greens voted with the Coalition to overturn the policy in Parliament.

Big energy users like aluminum smelters are shouting solutions to Australia’s energy woes.(Provided: Wezley Pitt)

He said there are parallels between the choices politicians face today and the choices from his tenure.

“You have to take a bit of ideology out of it, I think,” he said.

“The goal here is to make sure that when you turn on the power point, the power is there. It’s that simple.

“That is what the capacity mechanism must pay attention to.

“Obviously, we want to decarbonise.

“Obviously, it would be great if we had cheap 100 percent renewable energy today, backed by storage and supply stability, at the lowest cost to consumers.

“That’s the ideal world we want to achieve. But it will continue to require a period of transition.”

Call to focus on consumers

With Mr Bowen eyeing 2025 – or earlier – as the start date for the capacity market, debate is also raging about the role gas will play in the energy transition.

Authorities including the Energy Security Council and the Australian Energy Market Operators are pushing for gas to be included in any policy fix, saying the fuel can provide the robust and flexible generation needed to accommodate variable sources, such as wind and solar.

They also show that, unlike batteries, gas turbines can run for days and help deal with so-called renewable energy droughts when wind and solar power are short.

Nonetheless, the Victorian government is among those calling for gas to be barred from paying for any capacity and for the money to be directed to storage providers, such as batteries and water pumps.

Combet is philosophical about which technology should be considered for the policy, saying it is preferably “agnostic”.

There are warnings that Australia could run out of electricity unless the switch to green energy is handled with care.(ABC News: Leigh McDonald)

And he notes that while the capacity market is aimed at maintaining supply, other “complementary” policies can help reduce emissions.

He said the most important consideration should be consumer protection, claiming the current market is a “shemozzle” to everyone’s disappointment.

“And that hurts the most for low-income people,” he said.

“When there is a policy mess – basically deliberately ignoring reality is what the Liberals and Nationals have been doing for nine years – that hurts businesses, and it hurts energy retail consumers, but especially low-income people.

“Electricity prices are like a regressive tax. If they go up, that’s a bigger problem for low-income people.”

Shadow Climate and Energy Minister Ted O’Brien rejected the criticism.

“The capacity building mechanism was initiated and funded by the former Coalition government,” said O’Brien.

“Labor is back and so are higher prices, although Chris Bowen promised that prices will be cheaper under the Albanian Labor government.”

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