Australia told to reform market for clean energy investment
SYDNEY: A panel of independent experts has urged Australia to adopt sweeping electricity market reforms to unlock long-term investment in clean energy and improve access to hedging tools, as grid volatility intensifies.
Among the proposed changes is a new framework offering long-term derivative contracts to support investment in stable and dispatchable renewables and storage projects, according to a draft review of the National Electricity Market's wholesale sector.
This would address 'persistent' barriers to new investment – like the mismatch between long-term financing needs of new energy projects and short-term contracting horizons of buyers.
Australia needs to speed up its energy transition or risk missing an ambitious 2030 target of doubling renewable generation.
New projects and investment are stalling due to uncertainty over power market mechanisms and policy settings, threatening the nation's ambitions to become a major green energy export hub and complicating efforts to stabilise and decarbonise the grid.
'If we get the right market settings in place, we can deliver a secure, affordable, low-emissions electricity system,' said NEM Review chair Tim Nelson.
Yesterday's draft report said Australia's flagship clean power investment programme, which was expanded by a quarter last week, has helped address some risks faced by investors.
But it also warned that new projects are unlikely to proceed unless programmes like the Capacity Investment Scheme (CIS) are fully integrated into power markets.
Unlike the CIS, the proposed Electricity Services Entry Mechanism would operate within the market's legal framework, focus support on the tail end of project life, and recycle contracts to deepen liquidity.
Industry members welcomed the review, with the Clean Energy Council highlighting the 'importance of helping investors to strike long-term contracts, which is critical to providing greater revenue certainty to underpin 25 to 30-year infrastructure investments'. — Bloomberg
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