"The Energy Security Board's (ESB) final recommendations for National Electricity Market (NEM) reform are long awaited – and will remain so for a while longer, given the considerable work remaining to define key elements of the package released today," Innes Willox, Chief Executive of national employer association Ai Group, said today.
"The mooted capacity mechanism is still impossible to evaluate given its vagueness. It could be a huge change to the NEM, or a modest tweak. It could be palliative care for fading coal generators, or the foundation of investment in new clean dispatchable resources. It could armour the power system in gold plate at eye-watering expense, or deliver just enough new resources just in time to match accelerating retirements. We can't yet know.
"Detailed design work is now needed to develop a capacity option that is capable of being evaluated. Energy users and other stakeholders need to be fully included in that work, and their input needs to be heeded. In the absence of better information, deep concerns have arisen about the potential cost and emissions impacts of a capacity mechanism.
"If good engagement, good design and good evidence can allay those fears, a capacity mechanism will deserve stakeholder support. If not, it should go no further. However, no groundswell of support for a capacity mechanism has so far emerged in the more than two years of NEM reform consultation leading up to today's ESB report.
"Other elements of the ESB's proposed reforms are generally firmer and more widely supported. Numerous improvements to resource adequacy arrangements, the procurement of essential system services, scheduling and other matters will be very helpful. The work program for better incorporating demand side resources is extensive but sensible given the complexity involved.
"On the coordination of transmission, near-term focus on arrangements within Renewable Energy Zones is useful. The longer-term directions for locational marginal pricing and financial transmission rights remain unpopular with most energy stakeholders and the case for them is unsettled.
"The National Electricity Market is a complex beast and jargon-laden reform discussions are off-putting. But the NEM is central to competitiveness and continuity for business; prosperity for households; and the transition of our whole economy to net zero emissions by 2050. We can underpin all those goals if we keep the NEM up to date in a rapidly changing world – or undermine them all if we fail," Mr Willox said.
