The National Electricity Market review is a good opportunity to consider how Australia can transition its electrical system to be less carbon-dependent.
Germany’s energy transition is often seen as an incredible success story. Germany’s energy sector relied predominantly on fossil fuels and nuclear energy in the 1990s, but at present, renewable energy now provides about 30% of the country’s electricity.
Germany is right on track in achieving its 80% renewable target by the year 2020 and this transition has been the result of a range of policy measures. And the breadth and depth of these legal and regulatory reforms can help give Australia valuable lessons in energy transitions.
Germany has integrated energy and climate policy since 2007. The government’s Energy Concept sets out Germany’s energy policy until 2050 with a strong focus on transforming the energy system.
The Policy
The policy contains short, medium and long-term targets for reducing greenhouse gasses, enhancing energy efficiency in consumption, increasing renewable energy and building the transport sectors. Although the target setting policy is a political gesture, it shows the ambition and leads to political pressure to do action. The policy targets for renewable energy are also binding as objectives in the German Renewable Sources Act.
Also, it is noted that the German legislation for their electricity industry (Electricity Industry Act 2005) picks up on the goal of transforming the energy system. It states that electricity supply should be consumer friendly, efficient and cost-effective but also environmentally compatible and increasingly generated from renewable sources.
Australia on the other hand, continues to keep climate and energy policy separate. Australia’s National Electricity Objective remains confined to achieving the reliable supply in an enhanced and efficient way. Overall, Australia is lacking long-term target settings, which choke-off the necessary planning.
The Drivers
Germany’s big feed-in tariffs for renewable energy have been a major driver of transformation since it was first introduced in 1990. The tariffs were set separately for each of the generation sources. As a result, they have funded a wide range of renewable sources. It also helped in the emergence of small and medium-sized renewable generators which greatly minimized the political power of the big generators and electricity retailers that are owned by the same companies.
The 20-year payback periods and the guaranteed dispatch of renewable energy made the FIT a major driver in Germany’s electricity transition. With Germany’s renewable energy now maturing, the country is now increasing market exposure for renewable energy through reverse auctions that are similar to the mechanisms that were used by the Australian Capital Territory.
The Australian Renewable Energy Target and the state-based FITs have predominantly supported wind and rooftop solar, but both of these are hindered by the lack long-term targets and a considerable policy insecurity. A reverse auction scheme may give an efficient support for a wide range of renewable.
Enhancing the Networks
Changing the networks into more renewable energy friendly is one critical part of the Germany reform. The renewable energy act requires the owners of the poles and wires to give priority connecting renewable energy and upgrading the infrastructure where needed. These big investments are managed by the regulator.
As of present, there is no such mechanism for network investment in enabling renewable energy exist in Australia network regulation.
German regulators now consider the whole system to strategically upgrade the electricity networks. It includes the nationwide and the binding planning regime and investment into north-south interconnection. This also helps get and absorb b the massive investment in wind generation in the north.
The network constraints are major issues to getting 100% renewable future in Australia. The different modeling planning and exercises for big amounts of renewable energy have been done by the Australian Energy market Operator and Beyond Zero Emissions. Achieving these mentioned scenarios would need strategic and binding network planning across the whole NEM.
The Australian Energy Market Operator gives information in support of efficient network planning, but actual investments decisions are in the hand of the network owners. These network owners continue to operate within each of the states. They invest in networks if necessary to guarantee reliable and efficient energy supply.
Currently, there are no incentives in greening the network and strategically planning beyond state borders in the present regulatory framework.
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