Experts reject 'reheated' energy blueprint

·3-min read

An energy market blueprint that would pay generators to guarantee electricity supply has come under fire.

Existing coal and gas power plants as well as renewable energy providers would be eligible for extra peak period payments under a proposed "capacity mechanism" put to energy ministers.

The draft plan prepared by the Energy Security Board of regulators says the scale of investment to maintain reliability of supply over the coming decades is "dramatic".

A draft mechanism prepared last year under former energy minister Angus Taylor was tagged "CoalKeeper" by critics, who rejected it as extending the life of high-emitting coal-fired plants.

"What the ESB has come up with is the reheated version of the nonsense that they came up with before," energy economist Bruce Mountain told AAP on Monday.

"It's simply not credible."

Energy analyst Johanna Bowyer said the proposed payments to coal and gas generators could keep high-emissions capacity in the system for longer, delaying a move to a low-emissions electricity system.

"It could put upward pressure on electricity bills at a time when bills are rising in many states," she said.

The Smart Energy Council says more support is needed for commercial and community-scale batteries to back up wind and solar.

There are also calls for a new renewable energy storage target to get Australia to at least 82 per cent renewable energy generation by 2030.

Under such a scheme, credits could be created by battery, pumped hydro or other energy storage, and purchased by energy retailers or traded on a new market.

"This explicitly accounts for carbon and is a target to bring in new tech," Professor Mountain said.

He said regulators were "completely out of touch" and had failed to account for federal and state emissions reduction targets.

"They've set big targets, they want big changes."

Victoria on Monday ruled out fossil fuel-generated electricity from a future capacity market, while NSW said it would include gas in its future energy mix.

Energy Security Board chair Anna Collyer said the mechanism will be a key tool to ensure reliability of power supply amid an unprecedented period of transition.

Leaving himself room for negotiation, Climate Change and Energy Minister Chris Bowen said the proposal "simply informs state and territory ministers and myself about the issues to be worked through".

"It's appropriate that states be able to implement this in a way suitable for their needs but ... it will complement our emissions reduction target, not contradict."

Electricity and gas company Origin told AAP it wants to understand how the scheme will distinguish between existing plant and new plant, and rate the capacity that different technologies bring.

"Recent events in the market have underscored the need to move with urgency to establish a mechanism that rewards dispatchable capacity," a spokeswomen said.

"This will be important to support reliable supply as the energy transition accelerates."

Australia's biggest energy generator and largest emitter AGL welcomed the draft plan.

"Minimising costs to customers and ensuring an orderly and responsible transition should be a key focus of any mechanism," the company said.

"We'll take time to review the paper and make a submission to the ESB in due course."

Most market participants expect all coal-fired generation to cease by 2043.

While Queensland's plants are younger and have longer to run, ageing coal plants in Victoria and NSW are expected to become uneconomic this decade, the blueprint warns.

At the same time, electricity demand is forecast to at least double by 2050.

The energy regulators say it would be better to keep the existing generators in the market to minimise costs for consumers.

Large businesses and industrial premises equipped with renewables, which are providing a growing portion of electricity to the national electricity market, could also be in line for capacity payments under the proposal.

Demand-side assets such as batteries and new software are another source of "efficient resources" to the capacity mechanism, regulators say.

Input on the proposal is due by July 25, with a finalised plan expected by year-end.

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