By Simon Corbell
In a major policy speech Shorten has indicated Labor will endorse the National Energy Guarantee (NEG) in an attempt to achieve policy consensus on a national energy policy framework if it is elected to government and seek to negotiate with the Liberal opposition on its implementation. Given that the NEG was itself developed by the current federal Treasurer this is smart and pragmatic politics. However Labor is also recognising that the Coalition are unlikely to agree to this bipartisan approach due to their own internal divisions.
Shorten is therefore endorsing the proven policy mechanisms of directly contracting renewable energy projects by awarding contracts for difference, or some other contractual mechanism, through a reverse auction process as an alternative approach which will not require new legislation to be agreed through the Parliament. Labor is also proposing to utilise the existing legislative mandate provided to the Clean Energy Finance Corporation (CEFC) to invest in renewables to drive this process, promising to top up its coffers by $10 billion.
This direct contracting approach was first championed by the ACT Labor Government in 2012, when it implemented a reverse auction program for large scale and wind projects to achieve its 100% renewables target. Reverse auctions and contracts for difference have subsequently been adopted by the Victorian and Queensland governments. The lived experience of these policy mechanisms is clear, they provide investor certainty, the strength of the counter party (a sovereign government) lowers finance costs, and they can leverage additional economic development and shared benefit outcomes from renewable energy developers that create jobs, infrastructure improvement and benefit sharing across communities. The 2010 ACT reverse auction process showed how much cheaper large scale solar development was compared to economic models and supported 700MW of large scale generation. The Victorian 2018 reverse auction showed that large scale wind and solar were competing to be the lowest cost form of new build electricity generation in Australia and supported nearly 1GW of new wind and solar projects.
Federal Labor has also signalled there will be direct investment in new transmission infrastructure to give effect to the Australian Energy Market Operator (AEMO) Integrated System Plan (ISP) , again through the mandate available to the CEFC. This is a clear signal that Labor recognises that existing regulatory investment test structures in the National Electricity Market are inadequate and that there is a role for the federal government in “nation building” by backing the new transmission infrastructure needed to unlock the resource rich renewable energy zones identified in the AEMO ISP.
Energy efficiency and battery storage are also key elements of Labor’s new policy agenda. ARENA’s mandate is proposed to be extended to include providing financial support to support the economy wide energy efficiency measures identified in, but not funded by the National Energy Efficiency and Productivity Plan. Labor also recognises the role distributed storage can play and is promising to incentivise widescale take up of battery storage, promising grant funding of household battery installations on a means tested basis. It is also making access for low income households a priority, by announcing support for community power hubs around the country. These are based on the Victorian community power hub model, where community renewable energy initiatives can access technical, financial and other support for their development.
Finally Labor is focussing squarely on the issue of ensuring a just transition. Labor has announced it will establish a Just Transition Authority, as a statutory authority, to ensure the closure of thermal power plants is managed to ensure retraining, new economic development opportunities and other support is put in place.
Labor’s programs draw heavily on the experience of state and territory Labor government initiatives which have already developed many of the mechanisms Labor federally is now drawing upon. Reverse auctions, contracts for difference, battery storage grants, energy efficiency programs and community power hubs all have a lived experience in either the ACT, Victoria, South Australia or Queensland. What they signal is a determination to provide a clear pipeline for investment in large scale renewable energy development beyond 2020, and to expand the role of the federal government and its agencies in accelerating the clean energy transition. Those projects and developers and investors with existing experience of the state based programs will be well placed to respond promptly to a new national Labor administration agenda. It is also clear the focus will shift increasingly to sharing the benefits of the clean energy transition. We can expect the active involvement of the federal government in directly contracting or underwriting clean energy generation and associated transmission to require greater levels of community engagement, benefit sharing and economic development outcomes.