The government’s new energy plans will leave investors less confident than ever


Australians should be deeply concerned about the signals coming from the Turnbull government since this month’s release of Chief Scientist Alan Finkel’s report on the future of Australia’s electricity system.

On Tuesday the government announced a new package of policies for the electricity sector. This includes asking the Australian Energy Market Operator (AEMO) to look at “how to ensure that new continuous dispatchable power is provided, including what support is needed to promote new investment”.

Effectively, the government is asking AEMO to identify whether Australia has enough “baseload” generation and, if not, how the government should go about getting more.

In simple terms this marks a further reversion to central planning, either purposely by stealth, or accidentally through ignorance. The rushed nature of the announcement, without any forewarning, suggests the latter.

Going to plan?

Central planning can provide politicians with the illusion of certainty and control. When governments don’t see the outcomes they want in the market – in this case reliable and affordable energy (and, for some politicians, new coal-fired power stations) – taking command offers them the opportunity to deliver those outcomes.

But this presumes that governments know better than the market. History tells us they don’t. The result is often expensive and excessive building of new generation that does not guarantee reliable supply.

Some see this policy as the government walking away from its obligation to reduce emissions in the electricity sector. Others believe it signals success for the Minerals Council Australia (MCA) in its push to have the government build new coal-fired power stations.

The MCA has reportedly urged the cabinet to embrace a “reverse auction” scheme instead of the Clean Energy Target (CET) recommended by Finkel. Under a reverse auction scheme, the government would tender for new electricity generation. The lowest bid wins, and the winning bidder would receive a contract guaranteeing revenue for the electricity it generates.

Certainly, if the government were to choose a mechanism to procure new electricity generation, reverse auctions look like the obvious policy. Such auctions are common; indeed, the federal government already uses them to buy emissions reductions from a range of economic sectors under the Emissions Reduction Fund. The ACT government also uses them to procure large-scale renewable energy.

But reverse auctions are generally not used as a central climate change policy. Instead, they operate alongside emissions-reduction polices to encourage the development of specific types of generation technologies. In Germany, for example, reverse auctions are being used to incentivise new wind generation. The MCA will doubtless be hoping that the auctions specifically call for new, cleaner coal technologies.

Let’s be clear. The government’s announcement does not go as far as the MCA’s proposal. AEMO appears to have the responsibility for determining whether and how new electricity generation will be bought to market, and the government has not rejected Finkel’s CET proposal.

But nor is the announcement simply the government pressing forward with the “strategic reserve” suggested by Finkel. A strategic reserve is an insurance policy, ensuring enough backup generation is available in case something goes wrong in the market. Prime Minister Malcolm Turnbull’s announcement on Tuesday indicates that new generation will not simply be built as backup, but will play an active role in the market. After all, baseload generation is useless if it sits there and does nothing.

Proceed with caution

There are numerous reasons to be concerned about this announcement. It is not clear how such a proposal would work with any emissions-reduction scheme such as a CET. Providing simultaneous incentives for low-emissions generation through a CET and for “baseload” generation through a separate scheme sounds like a recipe for an expensive, unreliable system. And it would make meeting Australia’s emissions targets more complex.

Nor is it clear that Australia even needs more “baseload” generation at the moment. Signals in the electricity market suggest that if Australia needs anything it is flexible generation that can respond to sudden changes in demand and supply. This is not coal; it is gas, or perhaps battery storage.

Most of all, the announcement follows a broader trend of increasing government involvement in the electricity market. Whether it is the Commonwealth with its proposed Snowy 2.0 scheme, South Australia’s plan to build a state-owned gas power station, or Queensland’s manipulation of wholesale prices, electricity is now government business.

Anyone who thought the Finkel Review might bring some much-needed policy certainty to the electricity market is being rapidly disabused of that idea. Instead of fostering investor confidence, the government has just telegraphed the fact that it is prepared to intervene directly in the market. Any risk-averse investor will run away as fast as they can.

Once government starts intervening in the market, it will have to keep doing so. If you listen closely, you can hear the sound of two decades of market primacy in the electricity sector being flushed down the toilet.


Take our Solar Quiz Compare Energy Providers and Save

Download Your FREE Ultimate Guide to Solar Power in Australia - 2021 Edition

Beginners Guide to Solar Power

If you’re considering solar for your property or just looking to maximise the savings for your solar system, download a FREE copy of our "Ultimate Guide to Solar Power in Australia - 2021 Edition".

Become an expert and better understand the ins and outs of solar power and solar PV systems for your property.

Includes detailed explanations and diagrams of the various types of solar systems and their parts, solar battery storage systems, Government incentives, expected ROI periods, finance, energy-saving tips and more!

Download Your Free Copy Now!

Latest blog & information


Please provide your email address so that we can send your free copy of "The Ultimate Guide to Solar Power in Australia - 2021 Edition".

* By clicking "Send me a copy" I agree to the terms in TQC’s privacy policy.

Thank you

A link to download your copy of "The Ultimate Guide to Solar Power in Australia - 2021 Edition" has been emailed to the address you provided.

If this message does not appear in your inbox, ensure that you have provided the correct email address or check your junk/spam folder.

This message will close in 10 seconds or

Close and back to page

Understanding Batteries

Off-Grid Systems

For some households a battery system can be of great benefit and minimise a home’s reliance on the grid. However, it’s important to understand for a battery to be useful your solar system needs to be generating excess energy for the battery to store, which you can then use at night or when the sun is not out.

When selecting a battery, you’ll want to invest in a system that is most suited to your home and can drive the best return on investment (ROI). Despite a larger upfront cost, a higher quality battery may significantly increase your ROI.

    Battery systems start from $6,000 and costs can vary greatly based on the following factors:

  1. Cycle Life-Time

    The number of times a battery can fully charge and discharge.

  2. Battery Power (kW)

    How fast it can be charged or discharged.

  3. Storage Capacity (kWh)

    The maximum amount of energy a battery system can store.

  4. Battery Management System (BMS)

    An electronic ‘smart’ system that gathers data and manages the battery ensuring it does not overload or operate outside of its safe functioning zone..

  5. Inverter

    Battery systems require their own inverter if your solar system does not have a hybrid inverter.

  6. 'All-In-One Unit’

    A system which includes the battery, BMS and an inverter all in one unit.

  7. Warranty

    Length of time or cycles the battery system is under guarantee.

  8. Blackout Protection/Backup

    It’s important to note this is not a common feature of a battery system and could cost thousands of dollars to include. Blackout protection not only requires additional components but also a specialised installation and rewiring. For grid-connected homes, the cost for blackout protection can outweigh the benefit.

Additionally, if your purpose for adding battery is to go Off-Grid and become completely independent from the grid you will need to ensure your solar system can generate enough energy to power your home and your battery system is large enough to store this energy. For homes in metro areas going Off-grid is not cost effective and is only recommended for those in remote areas with limited access to the grid. Off-grid solar systems with battery start at approximately $30,000.

[gravityform id="4"]
<p class="gform_not_found">Oops! We could not locate your form.</p>