Energy companies send open letter of concern to government over ESB reforms

Pen signing document (open letter)
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Leading clean energy companies have come together to publish an open letter to state and territory energy ministers to highlight their deep concern about proposed reforms by the Energy Security Board (ESB) that could undermine reliability and slow the renewable energy transition.

The open letter, signed by the likes of Neoen, Pacific Hydro, Maoneng, Risen, Octopus, Siemens and Enphase, among others, was sent on Monday ahead of a meeting of state and territory energy ministers on Friday.

While the industry has welcomed and supports many of the reforms proposed by the ESB, two critical reforms are of significant concern:

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  • The establishment of a capacity mechanism, which could be used to subsidise existing coal plants and unnecessarily prolong the life of these increasingly unreliable generators. This has the potential to delay investment in new renewable energy and energy storage projects.
  • The introduction of a congestion management model, which will do nothing to deliver much-needed investment in transmission that is becoming a major barrier to a reliable and clean energy system. The clean energy industry believes there are better models to address congestion in the grid.

The open letter argues that the proposals for a capacity mechanism and new access model will add to the risk and uncertainty facing clean energy investors. This will exacerbate the slowdown in new investment in large-scale renewable energy that has occurred due to growing uncertainty from the regulatory frameworks and the continued politicisation of energy policy in Australia.

“This week’s meeting of energy ministers looms as a fork in the road for the future of our electricity market and the ultimate speed in which Australia can deploy clean energy and reduce our carbon emissions,” Clean Energy Council chief executive Kane Thornton said.

“The rates of investment in large-scale wind and solar projects has fallen 29 per cent in the last year and is down 70 per cent on 2018, with risks and uncertainty continuing to mount for investors.

“Now is the time to be ensuring that Australia is a more welcome destination for clean energy investors. The Australian Energy Market Operator anticipates that between 6GW and 19GW of new dispatchable resources will be needed across the National Electricity Market by 2040.

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“The good news is that investment in utility-scale batteries is ramping up, with over 600MW of capacity worth over $400 million committed in the first quarter of 2021. But investment confidence is fragile and requires a concerted set of policies and market reform. Therefore, investors are urging energy ministers to ensure that all market reforms help rather than hinder investment confidence for these much-needed clean solutions.

“While we do not support the ESB’s recommendations on these two reforms, we look forward to working further with states and territories, the Australian Energy Market Commission and the ESB to develop better mechanisms to address the real issues in the power system, including how to build the network needed to decarbonise and how to safely manage the transition from coal to renewables.”

View the open letter in full here.