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Electricity industry: A transition a low-carbon future Challenges and policy implications Changes occurring in the electricity sector • The Energy Market in Transition – strategic challenges for the sector are and will affect our work program… • Impact of new technologies, climate change policies, increasingly engaged consumers. – Generation sector – impact of intermittent generation across the NEM, Cth climate change policy uncertainty – Networks – decreasing utilisation (DG and batteries), more dynamic distribution networks, networks involvement in downstream markets/ring fencing – Retail – entry of new energy service providers into the market, impacts on consumer protection, treatment of vulnerable customers, dispute resolution framework, competitive neutrality. • Policy trilemma – price, GHG emissions, security of supply • Market reform through COAG Energy Council a priority. 2 A sector in transition Overall demand for electricity declined or stayed flat for the last six consecutive years. Peak demand trends are changing Key drivers: slowing industrial demand, consumers adopting energy efficiency products and 1.5 million installations of solar PV (20% in Vic) Investment in wind has been ongoing, coal and gas plants have closed in QLD, NSW, Vic, Tas Major changes being experienced across wholesale market, network and retail sector – impacts of increased take up of renewable generation, DG and new energy services + increasing consumer engagement. 3 Wholesale markets - the SA experience • Electricity/gas price peaks in South Australia in July 2016 • Confluence of events responsible: – Cold weather brought higher electricity demand – Augmentation work on the Victoria to SA interconnector – reducing imports – High gas prices impacting on Torrens Island Power Station • A number of industrial customers unhedged • Market worked as expected – price spikes will send investment signals for additional capacity 4 What does the SA experience tell us? • SA experience demonstrates need for: – demand side reform and action on energy efficiency – east coast gas market reform – leadership through COAG Energy Council on transitioning energy sector, supporting renewable energy and integration with climate policy • COAG Energy Council initiatives – – – – work on impacts of climate policies on energy sector Review of regulatory investment test for transmission AEMC system security market frameworks review Time to review the NEO? 5 Composition of Victorian generation 6 Wind generation capacity in Victoria 7 Clean energy transition • Expected that Victoria’s reliance on brown coal generation will decrease • Important that system security and reliability are maintained • Future market options include: – Potential for large scale storage to complement renewables – Investment in gas fired peaking plant – Demand side management options • Victorian Government Actions: – – – – – Renewable Energy Action Plan Demand Side Management Framework New Energy Technologies Sector Strategy Centre for New Energy Technologies Working with the COAG Energy Council on clean energy transition – Energy Efficiency and Productivity Strategy and NEPP 8 Victoria’s Renewable Energy Roadmap Removing barriers to distributed generation and storage Transforming Victoria’s Generation Sector Driving growth in the Victorian renewable energy sector Supporting households and communities to invest in renewable energy Direct Government facilitation and support http://www.delwp.vic.gov.au/energy Victoria’s Renewable Energy Action Plan 9 Victoria’s Renewable Energy Targets Announced in June 2016 25% by 2020, 40% by 2025 Auction Scheme Up to 5,400 MW of new renewable generation capacity 4000 additional jobs in 2024-25 10 Victorian demand management framework The Government will establish a policy framework that: – Incentivises and supports greater, more timely and more effective demand management in Victoria by consumers, networks and third parties This framework will: – – – – Enable Victoria to respond to changing patterns of demand Create long term savings for consumers Address barriers to demand side management Support the introduction of opt-in cost reflective network pricing – Assist in the longer term transition to renewable energy sources – Support the reliability of Victoria’s electricity supply – Drive national energy market transformation. 11 Demand trends in Victoria (Source: NEM Review, Metered demand, extracted 22 September 2016). 12 Solar PV uptake in Victoria 13 Peak demand creates pressure on localised areas of the network (source: http://nationalmap.gov.au/renewables/) 14 Victorian energy efficiency initiatives • Energy efficiency is one of the best ways for homes and businesses to reduce bills and greenhouse gas emissions. • The Victorian Government is committed to transitioning to an energy efficient economy. 1. 2. 3. Energy Efficiency and Productivity Strategy The Victorian Energy Efficiency Target (VEET) scheme The Residential Efficiency Scorecard • $24.2 million in 16/17 State Budget for energy efficiency • Energy Efficiency and Productivity Strategy to be released later this year 15 What action is the COAG Energy Council taking? • COAG Energy Council is leading work on: – Energy Market Transformation – Gas Market Reform – Integration of energy and climate change policy • Gas Market Reform – Gas markets characterised by absence of competition, liquidity and transparency – COAG Energy Council has signed off on major gas market reform implementation package – Northern and southern gas hubs, access to gas pipeline capacity, better market information • Energy Market Transformation 16 National response – COAG Energy Council Energy Council endorsed program of work – Energy Market Transformation- with a focus on four key themes: – Enhanced competition and innovation – Empowering consumers – Ongoing power system security – incl AEMC and AEMO system security work – Efficient investment and operation of electricity infrastructure Work streams include: – Stand-alone systems – Battery registration – Consumer protections for behind the meter supply 17 Stand-alone systems/micro grids Issues • Consumer protections • Reliability and service standards • Regulatory challenges – Networks – Retail Key questions • Should stand-alone systems/microgrids be regulated under a national framework? • What principles should be adopted in determining the need for, and nature of, any new regulatory arrangements that will apply to stand-alone energy systems? • What protections are necessary for customers serviced by stand-alone systems? 18 Energy storage registration Issues • Power system planning and operation • Emergency response • Safety (to the installers, line workers and the networks) Key questions • What data? • How should data be collected? • Who should host the register? 19 Energy storage registration Total installed battery storage capacity in the NEM (Source: National Energy Forecasting Report 2016, AEMO) 20 Consumer Protections for behind the meter electricity supply Electricity for on-site use where system is located on owner’s property (e.g. PV, battery storage, co-gen plant, portable generator) Different customer protections apply depending on business model Issues • Information Provisions • Dispute Resolution • Vulnerable Customers • Competitive Neutrality • Exploring the need for tailored regulation – balancing innovation with consumer protection 21