The report titled “Next Generation: The Long-Term Future of the National Electricity Market” asks for preliminary work on a “capacity mechanism” to promote investments in new electricity generation and lessen the possibilities of blackouts and power shortages.
However, the report states that the costs would definitely fall on consumers through more expensive electricity prices. A new capacity structure should be presented only if all other market alternatives have been utilised and supply is still under threat.
Based on an article published on the website of Grattan Institute, via a capacity mechanism, generators would be paid not only for the electricity they generate to satisfy the present demand but for ensuring to provide power in the future. Market retailers could contract for adequate electricity to meet the demand in the coming years, to assure new generation and storage is built in time.
Tony Wood, the Energy Program Director at Grattan Institute, said, “Australians have endured a decade of toxic political debates about climate change policy, South Australians suffered a statewide blackout last year, consumers across the country are screaming about skyrocketing electric bills, and energy companies are shutting down big coal-fired power stations.”
He added, “It is understandable that governments feel the need to ‘do something.’ But the danger is they will rush in and make things worse. What Australia needs now is perspective, not panic.”
The report presents a three-step policy in order to encourage investment:
- Implement all June 2017 Finkel review suggestions including the Clean Energy Target (CET).
- Work with current organisations to evaluate the market’s reliability framework.
- Present a “capacity mechanism” if the expected shortfalls cannot be met.
Wood concludes, “This pragmatic, planned approach offers the best prospect of affordable, reliable, secure, and sustainable power for Australians.”
Read the full report here.