Renewable energy zones and an emissions reduction mechanism: changes ahead for the electricity sector

A parliamentary inquiry report has unanimously concluded that targets for emissions reduction in the electricity sector should align with Australia’s international commitments under the Paris Agreement, as well as the commitment to achieve zero net emissions in the second half of this century. 

The Report, ‘Powering our Future – Inquiry into Modernising Australia’s Electricity Grid’ was released last month. It stops short of setting out concrete mechanisms to achieve its recommendations. Significantly, however it does establish a consensus between members from the Coalition, Labor and the Greens for the first time in many years without dissenting remarks. This consensus, paired with an overarching message that an effective and modern electricity grid must be underpinned by policy certainty, may signal a new push for bipartisan agreement in a highly contentious area of policy – a welcome development for the electricity sector.

The Report contains a number of policy directions significant for the renewable and alternative energy sector, including:

Renewable energy zones

The Report recommends that the AEMO investigate the need for additional transmission in certain areas of the grid, and the establishment of “renewable energy zones”. This would involve locating geographical areas best suited to renewable energy generation and possibly improving grid connections that would optimise renewable energy uses. This recommendation picks up on similar suggestions from the Finkel Report.

A mechanism for emissions reduction in the electricity sector

The Report recommends the establishment of a stable and enduring mechanism for scalable emissions reduction in the electricity sector, with appropriate notice given for changes in targets. It was concluded that any such mechanism should be technology neutral. The Committee noted the ongoing debate as to whether the electricity sector should bear a proportionate or disproportionate share of the emissions reduction burden, but refrained from favouring one approach over the other.

What next?

These findings and recommendations have been presented to Parliament and it is expected that a government response will be produced in due course.