Crawford School is The Australian National University’s public policy school, serving and influencing Australia, Asia and the Pacific through advanced policy research, graduate and executive education, and policy impact.
Australia’s electricity sector is on the cusp of major change which poses new questions for energy market design, regulation and policy. Ageing coal power plants will need to be replaced. Rapid technological change together with the desire to cut carbon dioxide emissions make renewable power coupled with energy storage the dominant option for new power supply. At the same time, new technologies provide opportunities for decentralised power generation and flexible demand responses. But the regulatory and policy sphere is lagging behind.
Is wind power to be blamed for last week’s South Australian blackout? As generation costs of wind and solar decrease into the range of fossil fueled power, the system impacts of variability (intermittency) become crucial. With increasing shares of wind and solar PV, variability imposes technical challenges and additional costs to the energy system that can be in the same order of magnitude as generation costs.
The real work is just beginning: Professor Ottmar Edenhofer explores the issues for international climate policy to make the Paris Agreement a success. Among them are the global carbon budget and two degrees target, the need for negative emissions, and a little on game theory and how this impacts climate. National minimum prices for CO2 emissions combined with international climate finance could be a way to put the Paris Agreement into practice.
It is now 20 years since the legislation establishing the National Electricity Market (NEM) was passed in the South Australian Parliament, and it is legitimate to ask how has the NEM turned out and how is it placed to deal with current challenges.
Dr Don Russell was involved with the early moves that led to the NEM.
Electricity production is Australia’s largest carbon dioxide emitting sector, and offers great potential for emissions reductions both in the short and long term, all the way to decarbonisation of the power supply. The existing policy framework however is not geared to support a comprehensive low-carbon transition. Government has foreshadowed a 2017 climate policy review, while the Labor party has said that it would implement new policies if in power.
Corrective taxation of negative externalities is not unambiguously welfare improving in imperfectly competitive markets. Gordon Leslie shows that for carbon taxation in wholesale electricity markets, introducing a small carbon tax that reduces without eliminating the cost advantage of emissions-heavy, coal based electricity generation over gas based electricity generation can increase equilibrium carbon emissions for some fixed levels of demand.