Following state and Federal Governments’ effective rejection of the capacity mechanism, it’s time to state the obvious: we need solutions that work, and work quickly. We don’t have the time to reform the energy market. Even if significant reform of the NEM were credible – dubious given the history of this in Australia – we need to look at tested, realistic solutions that we can begin implementing fast, rather than aiming for overly complex solutions that set perfection up as the enemy of the good.
The Energy Security Board’s capacity mechanism tried to address three competing interests: climate change, the orderly closure of coal and how to bring on new firm power. Now that this approach has been effectively rejected, we should look at addressing each of these separately using existing models and ideas as an easier, quicker and more efficient way to get some rubber on the road.
To address the climate and energy transitions, we need to deploy clean, firm power quickly. Reverse auctions for energy capacity have already been successfully implemented in Australia and overseas. This approach could be used as a basis for getting firm power out at speed, with minimum delay. The clear process and sharp rules of reverse auction are other benefits of this model.
NSW could simply ramp up the current targets of its LTESA firming and long-duration storage mechanism, something that is already ready to go. Other States could replicate this mechanism or accelerate their own auction mechanisms.
There needs to be other, separate mechanisms used for the orderly closure of coal and achieving carbon targets. But in the meantime, Australia can begin to address its need for firm capacity in the energy market without the delays caused by years of theoretical discussions, planning and market reform.
Article by Amy Kean, first published on LinkedIn.