Energy policy of Australia

History and governance

After World War II, New South Wales and Victoria started integrating the formerly small and self-contained local and regional power grids into large statewide systems run centrally by public statutory authorities. Similar developments occurred in other states. Both of the industrially large states cooperated with the Commonwealth in the development and interconnection of the Snowy Mountains Scheme.

Rapid economic growth led to large and expanding construction programs of coal-fired power stations such as black coal in New South Wales and brown coal in Victoria. By the 1980s complex policy questions had emerged involving the massive requirements for investment, land and water.

Between 1981 and 1983 a cascade of blackouts and disruptions was triggered in both states, resulting from generator design failures in New South Wales, industrial disputes in Victoria, and drought in the storages of the Snowy system (which provided essential peak power to the State systems). Wide political controversy arose from this and from proposals to the New South Wales Government from the Electricity Commission of New South Wales for urgent approval to build large new stations at Mardi and Olney on the Central Coast, and at other sites later.

The Commission of Enquiry into Electricity Generation Planning in New South Wales was established, reporting in mid-1985. This was the first independent enquiry directed from outside the industry into the Australian electricity system. It found, among other matters, that existing power stations were very inefficient, that plans for four new stations, worth then about $12 billion, should be abandoned, and that if the sector were restructured there should be sufficient capacity for normal purposes until the early years of the 21st century. This forecast was achieved. The Commission also recommended enhanced operational coordination of the adjoining State systems and the interconnection in eastern Australia of regional power markets.

The New South Wales Enquiry marked the beginning of the end of the centralised power utility monopolies and established the direction of a new trajectory in Australian energy policy, towards decentralisation, interconnection of States and the use of markets for coordination. Similar enquiries were subsequently established in Victoria (by the Parliament) and elsewhere, and during the 1990s the industry was comprehensively restructured in southeastern Australia and subsequently corporatised.

Following the report by the Industry Commission on the sector moves towards a national market developed. Impetus towards system wide competition was encouraged by the Hilmer recommendations. The establishment of the National Electricity Market in 1997 was the first major accomplishment of the new Federal/State cooperative arrangements under the Council of Australian Governments. The governance provisions included a National Electricity Code, a central market manager, the National Electricity Market Management Company, NEMMCO, and a regulator, National Electricity Code Administrator (NECA).

Following several years experience with the new system and a number of controversies an energy market reform process was conducted by the Ministerial Council on Energy.

As a result, beginning in 2004, a broader national arrangement, including electricity and gas and other forms of energy, was established. These arrangements are administered by a national regulator, the Australian Energy Regulator (AER), and a market rule-making body, the Australian Energy Market Commission (AEMC), and a market operator, the Australian Energy Market Operator (AEMO).

Coal-fired power

The main source of Australia's electricity generation is coal. In 2003, coal-fired power plants generated 77.2% of the country's total electricity production, followed by natural gas (13.8%), hydropower (7.0%), oil (1.0%), biomass (0.6%) and solar and wind combined (0.3%). in 2008–09, a total of 261 terawatt hours of electricity (including off-grid electricity) was generated in Australia. Coal-fired plants also constitute a majority of generating capacity which in 2008-9 was 29,407 MW. The total generating capacity from all sources in 2008-9 was approximately 51 GW with an average capacity utilisation of 52 per cent. In 2008-9 a total of 143.2 TWh of electricity was produced from black coal and 56.9 TWh from brown coal. Over the 10 years from 1998–99 to 2008–09, Australia's electricity use increased at an average rate of 2.5 per cent a year Since 2009 Australia's energy usage has decreased by 4.3% Depending on the price of coal at the power station, the long run marginal cost of coal based electricity at the power stations in eastern Australia is between 7 and 8 cents per kWh, which is around $79 per MWh. In 2003, coal-fired plants produced 58.4% of the total capacity, followed by hydropower (19.1%, of which 17% is pumped storage), natural gas (13.5%), liquid/gas fossil fuel-switching plants (5.4%), oil products (2.9%), wind power (0.4%), biomass (0.2%) and solar (0.1%).

Hydro electric power

Hydroelectricity accounts for 6.5–7% of Australian electricity generation. The Snowy Mountains Scheme is a massive water diversion, storage and hydro-electric scheme, which takes water from the eastern slopes of the Australian Alps (part of the Great Dividing Range) in eastern Victoria and southern New South Wales through pipes, tunnels and aqueducts into a series of dams, for use in hydro-electric power generation and irrigation in the Murrumbidgee and Murray valleys. The scheme created two major artificial lakes, Lake Eucumbene and Lake Jindabyne as well as a number of smaller lakes and ponds.

Wind power

In 2014, Australia's wind farms produced over 30% of the country's clean energy. Wind power supplied 4.2% of Australia's total electricity during the year. Australia had 1,866 wind turbines spread across 71 wind farms at the end of 2014. Three wind farms with a combined power generation capacity of 566.7 megawatts (MW) were completed in 2014.

By 2015, there were 4,187 MW of installed wind power capacity, with another 15,284 MW either being planned or under construction. In the year to October 2015, wind power accounted for 4.9% of Australia's total electricity demand and 33.7% of total renewable energy supply. As at October 2015, there were 76 wind farms in Australia, most of which had turbines of from 1.5 to 3 MW.

Solar power

Solar energy is used to heat water, in addition to its role in producing electricity through photovoltaics (PV).

As recently as 2007, less than 1% of Australian electricity came from solar power generation. This is mainly due to the higher cost per kW than other power sources because of the cost of solar panels. Innovative applications of PV technology being developed in Australia include concentrating systems to focus the solar energy on to a smaller area of higher efficiency cells and the use of building integrated PV, where the PV cells perform architectural or structural functions as well as power generation, thereby offsetting some of the cost.

Wave power

The Australian government says new technology harnessing wave energy could be important for supplying electricity to most of the country's major capital cities. The Perth Wave Energy Project near Fremantle in Western Australia operates through a number of submerged buoys, creating energy as they move with passing waves. The Australian government has provided more than $US600,000 in research funding for the technology developed by Carnegie, a Perth company.

Nuclear power

Jervis Bay Nuclear Power Plant was a proposed nuclear power reactor in the Jervis Bay Territory on the south coast of New South Wales. It would have been Australia's first nuclear power plant, and was the only proposal to have received serious consideration as of 2005. Some environmental studies and site works were completed, and two rounds of tenders were called and evaluated, but the Australian government decided not to proceed with the project.

Queensland introduced legislation to ban nuclear power development on 20 February 2007. Tasmania has also banned nuclear power development. Both laws were enacted in response to a pro-nuclear position, by John Howard in 2006, and the release of the Switkowski report into nuclear power.

An independent panel of Australian scientists and nuclear experts have been critical of the findings of the Switkowski nuclear inquiry. They found that the Switkowski report relies on some flawed assumptions which reveal a bias towards nuclear power on economic, technological, health and environmental grounds.

John Howard went to the November 2007 election with a pro-nuclear power platform but his government was soundly defeated by Labor, which is opposed to nuclear power for Australia.

Geothermal

There are vast deep-seated granite systems, mainly in Central Australia, that have high temperatures at depth and these are being drilled by 19 companies across Australia in 141 areas. They are spending A$654M on exploration programmes. South Australia has been described as "Australia's hot rock haven" and this emissions-free and renewable energy form could provide an estimated 6.8% of Australia's base load power needs by 2030. According to an estimate by the Centre for International Economics, Australia has enough geothermal energy to contribute electricity for 450 years.

The 2008 Federal Budget allocated $50M through the Renewable Energy Fund to assist with 'proof-of-concept' projects in known geothermal areas.

Biomass

Biomass power plants use crops and other vegetative by-products to produce power similar to the way coal-fired power plants work. Another product of Biomass is extracting ethanol from sugar mill by-products. The GGAP subsidies for Biomass include ethanol extraction with funds of $7.4M and petrol/ethanol fuel with funds of $8.8 million. The total $16.2M subsidy is considered as a renewable energy source subsidy.

Biodiesel

Biodiesel is an alternative to fossil fuel diesels that can be used in cars and other internal combustion engine vehicles. It is produced from vegetable or animal fats and is the only other type of fuel that can run in current unmodified vehicle engines. The advantages of using biodiesels are summarised below:

Subsidies given to ethanol oils totalled $15 million in 2003–2004, $44 million in 2004–2005, $76 million in 2005–2006 and $99 million in 2006–2007. The costs for establishing these subsidies are $1 million in 2005–2006 and $41 million in 2006–2007.

However, with the introduction of the Fuel Tax Bill, grants and subsidies for using Biodiesel have been cut leaving the public to continue using diesel instead. The grants will be cut by up to 50% by 2010–2014. Previously the grants given to users of ethanol-based biofuels were $0.38 per litre, which will be reduced to $0.19 in 2010–2014.

Fossil fuels

In 2003, Australian total primary energy supply (TPES) was 112.6 million tonnes of oil equivalent (Mtoe) and total final consumption (TFC) of energy was 72.3 Mtoe.

Coal

Australia had a fixed carbon tax of A$23 ($23.78) a tonne on the top 500 polluters from July 2012 to July 2014.

Australia is the fourth-largest coal producing country in the world. Newcastle is the largest coal export port in the world. In 2005, Australia mined 301 million tonnes of hard coal (which converted to at least 692.3 million tonnes of co2 emitted ) and 71 million tonnes of brown coal (which converted to at least 163.3 million tonnes of co2). Coal is mined in every state of Australia. It provides about 85% of Australia's electricity production and is Australia's largest export commodity. 75% of the coal mined in Australia is exported, mostly to eastern Asia. In 2005, Australia was the largest coal exporter in the world with 231 million tonnes of hard coal. Australian black coal exports are expected by some to increase by 2.6% per year to reach 438 million tonnes by 2029–30, but the possible introduction of emissions trading schemes in customer countries as provided for under the Kyoto protocol may affect these expectations in the medium term.

Coal mining in Australia has become more controversial because of the strong link between the effects of global warming on Australia and burning coal, including exported coal, and climate change, global warming and sea level rise. Coal mining in Australia will as a result have direct impacts on agriculture in Australia, health and natural environment including the Great Barrier Reef.

The IPCC AR4 Working Group III Report "Mitigation of Climate Change" states that under Scenario A (stabilisation at 450ppm) Annex 1 countries (including Australia) will need to reduce greenhouse gas emissions by 25% to 40% by 2020 and 80% to 95% by 2050. Many environmental groups around the world, including those represented in Australia, are taking direct action for the dramatic reduction in the use of coal as carbon capture and storage is not expected to be ready before 2020 if ever commercially viable.

Petrol

In the transport sector, fuel subsidies reduce petrol prices by $0.38/L. This is very significant, given current petrol prices in Australia of around $1.30/L. The acceptable petrol prices hence result in Australia's petroleum consumption at 28.9 GL every year.

According to Greenpeace, removal of this subsidy would make petrol prices rise to around $1.70/L and thus could make certain alternative fuels competitive with petroleum on cost. The 32% price increase associated with subsidy removal would be expected to correspond to an 18% reduction in petrol demand and a Greenhouse Gases emission reduction of 12.5 Mt CO₂-e. The Petroleum Resource Rent Tax keeps oil prices low and encourages investment in the 'finite' supplies of oil, at the same time considering alternatives.

Diesel

The subsidies for Oil-Diesel fuel rebate program are worth about $2 billion, which are much more than the grants devoted to renewable energy. Whilst renewable energy is out of scope at this stage, an alternative diesel–renewable hybrid system is highly recommended. If the subsidies for diesel were bounded with the renewable subsides, remote communities could adapt hybrid electric generation systems. The Energy Grants Credit Scheme (EGCS), an off-road component is a rebate program for diesel and diesel-like fuels.

Petroleum subsidies

Companies involved in the extraction of the fossil fuel petroleum are given special deductions as follows:

Federal Government

Australia introduced a national energy rating label in 1992. The system allows consumers to compare the energy efficiency between similar appliances.

Institutions

The responsible governmental agencies for energy policy are the Council of Australian Governments (COAG), the Ministerial Council on Energy (MCE), the Ministerial Council on Mineral and Petroleum Resources (MCMPR), the Commonwealth Department of Resources; Energy and Tourism (DRET), the Department of Environment and Heritage (DEH), the Australian Greenhouse Office (AGO), the Department of Transport and Regional Services, the Australian Competition and Consumer Commission (ACCC), the Australian Energy Market Commission, the Australian Energy Regulator and the Australian Energy Market Operator.

Energy strategy

In the 2004 White Paper Securing Australia's Energy Future, a number of initiatives were announced to achieve the Australian Government's energy objectives. These include:

Criticisms

1. On a net basis this is a tax on the top 40% of income earners which will then be used largely to subsidise the coal industry in attempts to develop carbon capture and storage in Australia, so called clean coal.
2. Deforestation is not included in the scheme where there will be reforestation in spite of the significant timing differences, uncertainty of reforestation and effect of leaving old growth forests vulnerable.
3. It is unclear what level of carbon price will be sufficient to reduce demand for coal-fired power and increase demand for low emissions electricity like wind or solar.
4. No commitment to maintain Mandatory Renewable Energy Target.
5. The scheme fails to address climate change caused by burning of coal exported from Australia.

Energy market reform

On 11 December 2003, the Ministerial Council on Energy released a document entitled "Reform of Energy Markets". The overall purpose of this initiative was the creation of national electricity and natural gas markets rather than state-based provision of both. As a result, two federal level institutions, the Australian Energy Market Commission (AEMC) and the Australian Energy Regulator (AER), were created.

Queensland

Queensland's energy policy is based on the year 2000 document called Queensland Energy Policy: A Cleaner Energy Strategy. The Queensland Government assists energy development through the Queensland Department of Energy and is most noted for its contribution to coal mining in Australia.

South Australia

The South Australian Government has developed an energy policy based on sustainability objective as well as on South Australia's Strategic Plan.

A major priority of South Australia's Strategic Plan is to reduce greenhouse gas emissions in South Australia to achieve the Kyoto target as a first step towards reducing emissions by 60% (to 40% of 1990 levels) by 2050.

Measures announced in South Australia include:

1. stabilisation of greenhouse pollution by 2020
2. legislated cuts of 60% in greenhouse pollution by 2050
3. legislated renewable energy target of 15% by 2014

In 2009 Premier Mike Rann announced plans to increase the State's renewable energy production target to 33% by 2020. (Letter from Energy Minister Michael O'Brien 29/4/11)

1. solar feed-in tariff
2. ban on electric hot water systems.

Victoria

In 2006 Victoria became the first state to have a renewable energy target of 10% by 2016. In 2010 the target was increased to 25% by 2020.

New South Wales

New South Wales has a renewable energy target of 20% by 2020. New South Wales had the world's most generous feed in tariff for solar power from 2010 – 2011 at A$0.60/kwh. This 60c/kWh feed in tariff was revoked for new customers from 27 October 2010. Those in the scheme will get that feed in tariff until 31 December 2016. Current customers enter under a net feed in tariff, in which the power is used by the consumer (and is therefore worth to them whatever they would have paid for that power). Excess power is exported at a low rate (from 0c to 7.7c per kwh).

Western Australia

In some remote areas of WA, the use of fossil fuels is expensive thus making renewable energy supplies commercially competitive. Western Australia offers renewable energy subsidies including; solar heaters, Photovoltaic rebate program for installations at households, schools, factories and renewable Remote Power Generation Program of >$500,000 rebates for large off-grid systems.

Australian Capital Territory

The ACT Government's "Sustainable Energy Policy".  an integrated policy framework for managing the social, economic and environment challenges faced by the Territory in relation to energy production and use, was released on 28 September 2011. The policy is a continued commitment to maintain affordable and reliable electricity and gas supply to Canberra. The policy also establishes the key objective of achieving a more sustainable energy supply as the Territory moves to carbon neutrality by 2060.

Other states

Tasmania has a concession rebate and a life support discount. The Northern Territory has similar programs.

Mandatory renewable energy targets

An Expanded Renewable Energy Target was passed by the Australian Parliament on 20 August 2009, to ensure that renewable energy obtains a 20% share of electricity supply in Australia by 2020. To ensure this the Federal Government has committed that the MRET will increase from 9,500 gigawatt-hours to 45,000 gigawatt-hours by 2020. The scheme lasts until 2030.

In 2011 the 'expanded MRET' was split into two schemes: a 41,000 GWh Large-scale Renewable Energy Target (LRET) for utility-scale renewable generators, and an uncapped Small-scale Renewable Energy Scheme for small household and commercial-scale generators. Following the 2014 Warburton Review initiated by the Abbott Government, and subsequent negotiations between the Coalition Government and Labor Opposition, in June 2015 the LRET target was reduced to 33,000 GWh.

Greenhouse gas emissions reduction targets

Coal is the most carbon-intensive energy source releasing the highest levels of carbon dioxide into the atmosphere.

Low Emissions Technology Demonstration Fund (LETDF)

Currently has funded six projects to help reduce GHG emissions, which are summarised below

82% of subsidies is concentrated in the Australian Government's 'Clean Coal Technology', with the remaining 18% of funds allocated to the renewable energy 'Project Solar Systems Australia' $75 million. The LETDF is a new subsidy scheme aimed at fossil fuel energy production started in 2007.

Feed-in tariffs

Between 2008 and 2012 most states and territories in Australia implemented various feed-in tariff arrangements to promote uptake of renewable electricity, primarily in the form of rooftop solar PV systems. As system costs fell uptake accelerated rapidly (in conjunction with the assistance provided through the national-level Small-scale Renewable Energy Scheme (SRES)) and these schemes were progressively wound back.

Public opinion

The Australian results from the 1st Annual World Environment Review, published on 5 June 2007 revealed that: