Roundup: Australia is faced with difficult energy policy choices

The Australian government is faced with the energy trilemma when trying to ensure stability, security and reliability in the energy system while balancing cost and meeting consumer needs for a transition to a low carbon, low-emissions economy, Minister for Environment and Energy Josh Frydenberg said on Tuesday.

Addressing the annual Energy Update by the Australian National University (ANU), Frydenberg said the government is committed to taking necessary steps to keep the electricity secure and stable through the transition; keeping prices as low as possible by improving the operation of the gas market, reforming network regulation and increasing energy efficiency; and taking a non-ideological approach to emissions reduction.

In October, the Energy Council of Australia asked Alan Finkel, Australia's Chief Scientist, to bring energy market reforms together in a national approach to energy security and reliability.

A key area the Finkel Review will address is the challenges to system security from an increasing share of non-synchronous generation.

As the generation mix shifts to more non-synchronous generation like wind and solar, it is also creating the need for new ancillary services which were not priced and were therefore taken for granted.

To bring down the energy bills, the Council of Australian Governments (COAG), the peak intergovernmental forum in Australia between federal and state/territory governments, is looking at reforms to the appeal mechanism for network decisions, which has contributed to rising prices.

The minister pointed out that gas is an important transition fuel. It can assist in providing a pathway to a lower emissions generation future with up to 50 percent fewer emissions than coal, depending on the generation technology.

The government also promised to play its part in facilitating the transition to a lower emissions future by setting up the Emission Reduction Fund, funding for clean energy research and development, and increasing renewable energy through bi-partisan Renewable Energy Target.

Under the Emissions Reduction Fund, the recent fourth auction brought the total contracted abatement to 178 million tonnes from 397 projects at an average price of 11.83 AU dollars (8.8 U.S. dollars) per tonne.

The Renewable Energy Target aims to deliver 23.5 percent of Australia's electricity generation by 2020.

Also at the forum, experts warned that Australia needs to consider a carbon price of around 140 U.S. dollars a tonne by 2040 to help the world meet its target to keep global warming below 2 degrees Celsius.

Director of the ANU Energy Change Institute Professor Ken Baldwin said the latest World Energy Outlook, released by the International Energy Agency (IEA) earlier this month, found global energy policies were well behind those needed to keep global warming below the 2 degrees target by the end of the century.

"The carbon price required to keep below 2 degrees is projected by the World Energy Outlook to be 20 U.S. dollars, 100 U.S. dollars and 140 U.S. dollars per tonne in 2020, 2030 and 2040 in developed economies."

"Australia needs to consider this - not only in order to mitigate its own greenhouse gas emissions - but also to plan for the future of its trade-exposed industries," Baldwin said.

The ANU Energy Update is the ANU Energy Change Institute's annual flagship event, bringing together experts from government, industry and the International Energy Agency to discuss energy trends, new technologies and energy security. Endit