Policy update May 2021 04 May 2021
By Rob Murray-Leach
In the last six months the global pressure has risen on Australian governments, businesses and the broader community to take action on climate change, with Europe continuing work on a carbon border adjustment mechanism and many global leaders and trading partners taking significant action to reduce emissions.
On 22 April Joe Biden made a stunning announcement that the US would aim to reduce its greenhouse gas emissions by between 50 and 52 per cent below 2005 levels by 2030. This almost double’s the US’s climate ambitions, as Obama had committed the US to reduce its emissions by between 26 to 28 per cent by 2030. However, this announcement could also be seen as falling short, as it just brings the US into line with the European Union’s ambition to reduce its emissions by 51 per cent by 2030.
The US and Europe now have emission reduction targets that are substantially higher than Australia’s target to reduce its emissions by 26 to 28 per cent by 2030, and there will be significant pressure to raise our ambition in the lead-up to Glasgow climate summit at the end of the year.
As with so much in carbon and energy policy in recent years, the state and territory governments are filling the void caused by the lack of national action. On 2 May, the Victorian Government released its new Climate Change Strategy. Victoria has already reduced its emissions by 24.8 per cent between 2005 and 2019, and this strategy will align it with global ambitions, aiming to reduce the state’s emission by 45 to 50 per cent below 2005 levels by 2030. The Victorian Government has also set an intermediate target to reduce emissions by 28-33 per cent by 2025. While this does push a lot of emission reductions into the second half of the decade, I’m increasingly of the view that big change does require several years to ramp up.
So where will these emission reductions come from? The vast majority will be a rapid transition from fossil-fuel generation to renewables, with support from energy efficiency, the adoption of electric vehicles and some on-farm measures. The big announcement associated with the strategy was $100 million of new measures to encourage the uptake of zero emission vehicles.
In relation to energy efficiency, the Victorian Government announced its key policies in Budget in November 2020. The Climate Change Strategy reiterates these policies and other existing policies, including:
- Its $797 million energy efficiency and affordability package;
- Raising the minimum standard for new homes in 2022 to 7 Star NatHERS;
- Minimum standards for rental homes;
- Effectively a $200 million investment in the Greener Government Building Program, with additional funding for public health facilities;
- The $31 million Business Recovery Energy Efficiency Fund, which we understand has started to allocate funding.
One new announcement that could potentially be used for energy management is the additional commitment of $10 million for a pilot program to develop and implement 250 on-farm action plans. The details on this are still fairly hazy, and we will keep you briefed about whether this will enable on-farm energy management.
The Victorian Climate Change Strategy is a solid plan, and well worth reading.
Work is continuing on a range of energy markets reforms, including the finalisation of the details of the Wholesale Demand Response Mechanism (WDRM). On 4 May the EEC’s Energy Market Task Group met with senior staff at the Australian Energy Market Operator (AEMO) for a productive meeting that should lead to AEMO taking some actions that will give the industry more foresight about how that mechanism will roll out.
The Australian Energy Market Commission (AEMC) has also released its Draft Determination for rewarding ultra-fast frequency services (including some forms of demand response). Submissions for this are due by 3 June 2021.
Not to be outdone, the Australian Energy Market Operator (AEMO) is consulting on its energy efficiency assumptions for its electricity forecasting. If you’re interested in getting your head into some very sophisticated divination skills for future energy consumption patterns (think of it as reading entrails to see the future but with more charts), submissions are due on 12 May 2021 to email@example.com. The document is a bit of a challenge to find on the AEMO website, but you can download it here.
However, the big news is that on 30 April the Energy Security Board released its consultation paper on post-2025 energy market design options. Let me be clear – this is a beast of a paper that runs over 200 pages and it helps if you are an energy market wonk to grapple with it. The EEC will be putting in a submission by 9 June 2021, and if energy markets really are your bag then I strongly encourage you to read it.
The EEC and Energy Security Board will be holding a joint forum on the consultation paper on Wednesday 12 May from 1 to 2:30pm Australian Eastern Standard Time (AEST). If you are an EEC member and would like to register to attend this forum, please email firstname.lastname@example.org. Places will be strictly limited.
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This article was originally published in the May edition of Efficiency Insight.