Energy Minister Josh Frydenberg has commissioned the Australian Energy Market Operator (AEMO) to assess the generation shortfall the country may face following the closure of coal-fired power stations.
Mr Frydenberg has written a letter to AEMO, as reported by the Financial Review, asking for a risk assessment of removing a large amount of coal-fired generation in a short period of time.
The letter follows Dr Alan Finkel’s recommendation in the Final Report of the Independent Review into the Future Security of the National Electricity Market requiring a three-year notice period for any closure of coal-fired power station.
“As you are aware, a significant amount of ageing baseload generation is being phased out over the next five to 15 years,” Mr Frydenberg said in the letter to AEMO chief executive Audrey Zibelman.
“In response, Dr Finkel’s review recommends consideration of generator reliability obligations and a strategic capacity reserve, among other measures, to act as a safety net against supply shortfalls in the future.
“Accordingly, I am writing to request that AEMO provide detailed advice on the risks to reliability and affordability posed by the recent and expected exit of base-load generation and options to deliver an adequate level of continuous, dispatchable power in the future.”
The Energy Minister also asked the market operator to evaluate if there is enough generation to meet the country’s NEM reliability standards in the next decade, and look what can be done to stabilise electricity prices.
The Federal Government has agreed with 49 of the 50 recommendations delivered in the final report.
It is yet to agree on the Clean Energy Target recommended in the report as the most effective mechanism to stabilise the country’s energy system.
The CET has sparked debate among politicians regarding whether it would lead to new coal-fired power stations.
AEMO has until September 1 to provide advice to the COAG Energy Council to allow state and federal governments respond by the end of the year.