Australian states and territories revolt over federal government’s coal power subsidy plan

The federal government is facing a revolt from states and territories over its plan to allow subsidies for coal and gas-fired power stations as part of reforms to shore up reliability of the electricity grid.

Key points:

  • The federal government wants coal and gas-fired power stations to be eligible for electricity reliability subsidies.
  • States and territories are objecting, concerned it will prolong the life of polluting power generators.
  • The ACT and Victoria will lead the push against Energy Minister Angus Taylor’s plan at a meeting of energy ministers today.

Victoria “will not support” the plan it dubs “CoalKeeper,” and the ACT will “adamantly oppose” it at a meeting of federal, state and territory energy ministers.

The federal government wants to introduce a Physical Retailer Reliability Obligation (PRRO) to ensure there is enough electricity available in the National Electricity Market (NEM) at all times to fill gaps when wind and solar power cannot meet demand.

The PRRO would require energy retailers to pay generators for spare energy capacity in case it is needed.

That spare capacity could come from renewable resources like batteries, pumped hydro, and demand management, but the federal government wants it to also include unused capacity in coal and gas-fired power plants.

That could see energy retailers giving money to coal and gas-fired generators and prolonging their operations, as keeping ageing facilities running may be cheaper than building new, zero-emissions storage options.

ACT Energy Minister Shane Rattenbury will propose amendments to the scheme so that the PRRO payments can only fund renewable, zero-emissions technologies, such as batteries.

“The ACT will adamantly oppose any proposed subsidies to extend the lives of polluting coal and gas-fired power stations,” Mr Rattenbury said ahead of the meeting.

“The current guidelines leave too much to chance,” he said, insisting reforms to the electricity grid happen “in a way that rapidly reduces emissions from Australia’s electricity sector”.

The PRRO proposal — also known as a capacity mechanism —  is part of a broad set of reforms developed by the Energy Security Board to ensure the NEM can manage the influx of renewable energy into the grid beyond 2025.

Half of all coal-fired power generators in the NEM could be closed as soon as 2030, which will require either new energy storage capacity or more pressure on the remaining power plants to provide stability to the grid.

Victoria is likely to back the ACT’s proposed changes for new storage capacity rather than support for existing coal-fired power plants, with Energy Minister Lily D’Ambrosio saying the current proposal is driving down investor confidence.

“Victoria will not be supporting CoalKeeper payments to ageing fossil fuel generators,” she said. “A capacity mechanism is a possible solution to the lack of investment certainty – but it must be designed properly.”

“Victoria is the pre-eminent place for investment in the new zero-emissions energy capacity and we don’t want to see investors lose confidence.”

New South Wales has not endorsed the federal government’s plan either, with Energy Minister Matt Kean having only said he would be “carefully examining” it to ensure that it would not push up prices for households.

Plan will keep energy affordable, minister says

Federal Energy Minister Angus Taylor disputes Victoria’s claim investor confidence is being damaged by the prospective PRRO.

“Over 13,300 megawatts of renewable capacity [have been] added in the last two years alone,” he said.

“However, this has only been matched by 235 megawatts of new dispatchable capacity projects, and we will need up to 19,000 megawatts of dispatchable capacity in coming years.”

Mr Taylor describes the PRRO as a “technology-neutral” means of ensuring there will be enough dispatchable power in the NEM.

“We need to ensure we have the on-demand power needed to keep the grid reliable and affordable for Australians, and support continued growth in renewables,” he said.

“Consumers must be the priority and we owe it to them to ensure affordability and reliability.”

In a letter to ACT Energy Minister Shane Rattenbury, Angus Taylor criticised the territory’s rapid adoption of renewable energy and urged Mr Rattenbury to “consider the advice of the independent Energy Security Board”.

“As the smallest jurisdiction in the NEM, the ACT benefits from actions to maintain and invest in new dispatchable generation in other jurisdictions,” he said.

“Customers in the ACT are already struggling to absorb the 37 per cent increase in network charges resulting from your government’s high-cost agreements with renewable generators.”

“It is vital that consumers across the NEM are not put in a similar position.”

By Melissa Clarke

This article was originally shared by ABC News.