News National Finkel Review: AGL, Alinta call for ‘reward structure’ for baseload power generators

Finkel Review: AGL, Alinta call for ‘reward structure’ for baseload power generators

power stations agl
AGL has brought forward the closure of Victoria's Loy Yang power station, as well as Bayswater, in NSW. Photo: ABC
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Some of Australia’s largest energy companies are calling on the Federal Government to reward the baseload generators that effectively keep the network operating, and the lights on, when renewable sources are not producing power.

In its submission to the Finkel Review of the National Electricity Market (NEM), Alinta Energy calls for a national, co-ordinated and long term climate and energy policy which “eliminates inconsistencies and moves away from political ideology”.

Retailer AGL Energy criticised the “piecemeal introduction of carbon reduction and renewables policies” which it said had had unintended consequences on the energy market, most notably in South Australia which has faced a series of blackouts in the last six months.

That view is backed up by ERM Power which blames the nation’s energy woes on a decade of conflicting policy interventions which have sent mixed signals to investors.

“Certain technologies have been undermined and the broader consequences of market intervention and subsidies have not been understood, with dire consequences,” it said in its submission.

The Finkel Review is investigating the reliability and security of the nation’s electricity network at a time when coal-fired power stations are being phased out, and the eastern seaboard is facing a potential gas shortage.

Industry calls for incentives and rewards

Alinta Energy supports the existing Renewable Energy Target (RET), which mandates that 23.5 per cent of Australia’s energy will come from renewable sources by 2020, but said it should be extended by another 15 years to provide a “stable growth pipeline”.

State governments should not be setting their own targets, according to the energy company, which warns it “could increase uncertainty and further deter investment” in the sector.

But as Alinta points out, renewable energy has its limitations. Wind and solar are intermittent or “non-dispatchable” sources, meaning their frequency fluctuates with the breeze or sunshine and must be stabilised by baseload or “dispatchable” sources, which can generate power with the flick of a switch.

Alinta, along with ERM, AGL and ATCO Australia are calling on the Government to set up a “reward structure” for baseload power generators, effectively the back-bone of the network, and believe companies should be given incentives to maintain and procure those plants.

They also want to recognition for the service they provide in keeping the network’s frequency stable when large amounts of renewables are online.

“A reward structure that reflects the value that important grid support services (such as inertia and frequency control) provide to the system should be created,” Alinta Energy said.

ERM points to a system in the United States which rewards generators that can be ramped to capacity and synchronised to the grid within a short period of time.

In its submission, AGL’s chief economist Tim Nelson said additional measures may be required to ensure the system’s security and accommodate for the “unintended consequences of climate change policy on the operation of energy markets”.

Prime Minister Malcolm Turnbull this week sought guarantees from the major east coast gas companies to boost domestic supply, after the energy market operator warned Queensland, Victoria and New South Wales would face gas shortages as early as next year if nothing changes.

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