Committee view

5.1        This interim report has canvassed in broad terms the evidence received in the inquiry thus far. Even at this stage of the committee's inquiry, some clear themes have emerged which are worth noting here.

Reality of the transition away from coal fired power generation

5.2        The age and declining economic potential of Australia's fleet of coal fired power generators, as well as Australia's commitment to reducing its carbon emissions footprint in line with the Paris Agreement, means it is inevitable that many of these coal fired generators will cease operations in the medium term. This will be the case even in the absence of any further policy measures from government to encourage closure of these generators and further uptake of renewable generation.

5.3        The question is not if coal fired power stations will close, but how quickly and orderly these closures will occur, and what supporting policies, if any, will be in place to help manage the process.

5.4        It is imperative that this reality is acknowledged by government, industry and the broader community, so that this transition can be adequately planned for and implemented at the lowest cost to consumers, taxpayers, workers and communities.

Need for an orderly closure process to encourage price stability and investment certainty

5.5        Some stakeholders have put forward the view that no further policy consideration or intervention is necessary to facilitate an orderly exit of coal fired power generators from the market. This view was vigorously refuted by other submitters and witnesses, who argued that leaving retirement decisions solely to plant operators creates inefficient outcomes, causes greater price volatility and exacerbates the instability and costs for affected workers and communities.

5.6        The experience of announced coal fired power station closures in Australia over the last four years shows that companies, on average, have given less than four months' notice to affected workers and communities of upcoming plant closures.[1] From a national, long-term planning perspective, this is clearly unacceptable. It highlights the need for an orderly closure process to be facilitated by government on a nation-wide basis, with closures announced ahead of time to give certainty to investors, take into account impacts on the broader electricity system, and allow for a just transition for affected workers and communities.

5.7        The committee has heard that uncertainty around the government's future energy and climate policies are a key factor undermining the ability of market participants to make informed long-term investment decisions. A coordinated, national approach to energy decarbonisation must be pursued, with collaboration between all three levels of government, industry and workers being key to ensuring that regional issues around plant closures are given due prominence.

5.8        The need for a national approach means that it is imperative for the COAG Energy Council to agree on a mechanism for the orderly retirement of coal fired power stations. This should include amending the National Electricity Objectives to include a pollution reduction objective in addition to the three existing objectives of reliability, safety and security.

5.9        The committee considers that this transition to a low-carbon electricity sector will also require coordination by a standalone statutory authority that can oversee the implementation of mechanisms to close coal fired generators and measures to support workers and communities, as argued for by various stakeholders to the inquiry.

Recommendation 1

5.10      The committee recommends that the Australian Government adopt a comprehensive energy transition plan, including reform of the National Electricity Market rules.

Recommendation 2

5.11      The committee recommends that the Australian Government, in consultation with industry, community, union and other stakeholders, develop a mechanism for the orderly retirement of coal fired power stations to be presented to the COAG Energy Council.

Recommendation 3

5.12      The committee recommends that the Australian Government, through representation on the COAG Energy Council, put in place a pollution reduction objective consistent with Australia's obligations under the Paris Agreement in the National Electricity Objectives.

Recommendation 4

5.13      The committee recommends that the Australian Government establish an energy transition authority with sufficient powers and resources to plan and coordinate the transition in the energy sector, including a Just Transition for workers and communities.

Next steps for this inquiry

5.14      The committee has heard that the research base investigating specific policy options to facilitate the closure of high-emissions power generators in Australia is underdeveloped. With an independent review of Australia's energy security to be presented to COAG in early 2017, and the government's scheduled review of climate policy due to be undertaken in 2017, it is vital that an honest and robust discussion about these issues continues to take place. Rigorous debate and testing of policy options is required in order to ensure that Australia's policy framework into the future is comprehensive and fit‑for‑purpose.

5.15      The remainder of the committee's inquiry will focus primarily on the possible policy mechanisms that could be pursued to assist the transition away from coal fired power generation in Australia. Further specific recommendations to this end will be made in the committee's final report.

Senator Larissa Waters
Chair

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