All energy generators, including traditional gas and coal-fired plants, should be paid to have its capacity available when required to ensure reliable supply, according to a new draft paper.
Australia’s Energy Security Board (ESB) has highlighted the current important role that fossil fuels played in the national energy grid as the country makes its transition toward renewable energy sources.
A “capacity mechanism” would guarantee generators’ payment even while on standby in order to meet ballooning demand and avoid any supply shortfalls.
“It would be more efficient to pay to keep the existing generator in the market to minimise costs for consumers,” the paper, published on June 20, said.
The ESB stressed that the “stakes have never been higher” and outlined the challenges that the energy grid faced, the most pressing of which is ageing and early retiring coal generators.
It follows the shock decision by the Australian Energy Market Operator (AEMO) on June 15 to suspend the entire national energy market to ensure a reliable energy supply. The national energy market covers all jurisdictions except Western Australia and the Northern Territory.
The AEMO has forecast electricity demand to at least double by 2050. However, all coal-fired generators, which currently account for over half of the national energy market generation output, are slated to cease generating by 2043 at the latest.
Federal Energy Minister Chris Bowen said Australia required “every bit of existing technology firing,” including coal, which played a “very important” role in the short term.
“The Energy Security Board are saying that the mix of technology should be in the mix. Of course, existing coal-fired generators have to be repaired. And they have been repaired and they are being repaired,” he told reporters on June 20.
Bowen said he would work with state and territory energy ministers to develop a capacity mechanism that would become the national framework, but states would be able to adjust according to their own needs.
The Greens Leader Adam Bandt criticised the plan for paying coal and gas generators saying it would draw out the energy problems at hand.
“Paying them to stay in the system for longer is only going to prolong the problems and also prolong the transition to renewables,” he told the ABC.
In response, Bowen said the mechanism would “complement” the country’s emissions reduction target and its significant renewables transformation.
Prime Minister Anthony Albanese said the mechanism was “common sense” and likened it to an “insurance scheme” for the energy system.
The ESB said if energy ministers agree to implement a capacity mechanism, it should be operational by July 1, 2025.
The draft plan is open for industry consultation until July 25.