Energy Ministers agree on active steps to deliver the energy transition
17 August 2022
17 August 2022
The Energy Ministers' Meeting comprises Commonwealth, State, Territory and New Zealand Ministers responsible for energy (Energy Ministers).
Discussions at the Energy Ministers' Meeting held on 12 August 2022 focussed on the current state of the market and included updates from the Australian Energy Market Operator (AEMO) and the Australian Competition and Consumer Commission (ACCC) on the recent east coast market suspension, current operating conditions in the electricity and gas markets and the domestic fuel availability and price outlook for 2022-23 summer.
A copy of the ministerial meeting communique can be found here.
The Energy Ministers agreed to establish the National Energy Transformation Partnership, a framework for cooperative action by Commonwealth, State and Territory governments to agree on priority actions and support the energy transition in Australia. The Energy Ministers agreed on seven principles for collaboration, as well as a number of initial priority themes.
It is under this partnership that the Energy Ministers agreed to fast track an emissions objective into the National Energy Objectives (NEOs). The NEOs govern and guide the Australian Energy Market Commission (AEMC) under national energy legislation.
The current NEO, as stated in the National Electricity Law, is "to promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to:
The NEO under the National Energy Retail Law and the National Gas Law are drafted on similar terms. At present, the NEOs are silent on environmental considerations and emissions reduction.
The balance of the National Energy Transformation Partnership's initial priorities for action are to:
Work streams to support action under each priority theme will be developed in consultation with industry and community stakeholders.
In June 2022, the Energy Security Board (ESB) released a high-level design paper outlining a proposed capacity mechanism for the NEM (see our client alert on the design paper here).
At the Energy Ministers' Meeting on 12 August 2022, the Energy Ministers acknowledged the work of the ESB, however commissioned a new framework to deliver capacity, ensure an orderly transition and incentivise new investment in firm renewable energy. The rejection of the ESB's design comes after substantial concern from the industry during the consultation period for the proposed capacity mechanism. Senior officials were specifically instructed by the Energy Ministers to take into account economic and emissions reduction considerations in the design of the new framework.
Additionally, the Energy Ministers asked the ESB to expedite work on the congestion management mechanism (see our energy alert on the ESB's transmission access reform consultation paper here).
The ESB was due to release its draft recommendations for the detailed design of its proposed hybrid access model in September 2022, with consultation occurring until October 2022 and a proposed rule change request to the Energy Ministers expected in December 2022.
AEMO and the ACCC briefed the Energy Ministers on the risk of gas supply shortages in 2023 on the east coast. The Energy Ministers agreed on a number of measures intended to ensure that AEMO has the powers and functions required to manage security and reliability risks across the east coast leading up to the forecasted gas shortfalls.
The reforms are intended to improve efficiencies and support further gas supplies for the domestic market and include:
The Energy Ministers noted the reforms will respect existing foundational contracts for export supply and of international partners.
Authors: Paul Curnow, Partner; Andre Dauwalder, Senior Associate; Lucinda Merrett, Lawyer.