Finkel Review ‘does not pass the climate test’

The much awaited Finkel Review makes several recommendations to make Australia’s National Electricity Market more secure, reliable, and low-carbon. But experts say it falls short of what’s needed to meet national and global climate goals.

Australia’s chief scientist Alan Finkel has released a much-anticipated plan to make the country’s national electricity market more secure, reliable, affordable and low-carbon, but experts are worried that the recommendations fall short of the country’s national and global climate goals.

A key suggestion in the report, titled ‘Blueprint for the Future’ and presented to federal and state government leaders in Hobart on Friday, is the adoption of a Clean Energy Target (CET) to drive investment into low-emissions power generation technologies. 

Under the CET, any company that can produce electricity below a certain threshold of emissions intensity would be given an incentive to enter the market, regardless of whether it is wind, natural gas, or coal and carbon capture-powered.  

These companies would receive certificates for the electricity they produce, and electricity retailers would have to purchase these certificates to prove low-emissions electricity adoption. 

More generators entering the market would lead to lower prices for consumers, noted the report, which is widely known as the Finkel review. 

The CET would take effect after the country’s current Renewable Energy Target—a scheme that aims to source at least 33,000 gigawatt hours, or 23.5 per cent of Australia’s energy mix, from renewables by 2020—expires in three years’ time. 

Finkel modelled the adoption of a CET with a view to reducing Australia’s emissions by 28 per cent from 2005 levels; the country has pledged to do so by 2030 as part of its commitment to the Paris Agreement on climate change. The Paris Agreement also aims to achieve net zero emissions worldwide by the middle of the century.

However, the country’s Climate Change Authority has said that if Australia is to do its fair share to cap global temperature rise at two degrees Celsius—the internationally agreed target—it should cut emissions by between 40 and 60 per cent below 2000 levels.

Amandine Denis-Ryan, acting chief executive officer of think tank ClimateWorks Australia added that the electricity sector needs to reduce its emissions by between 50 and 70 per cent below 2005 levels by 2030.

“The electricity sector will need to deliver more than the 28 per cent emission reductions by 2030 modelled in the Review, if we are to meet our current 2030 target at the lowest cost,” said Denis-Ryan.

When deciding on the emissions intensity threshold and target for the CET, “we urge the government to consider the long-term ambition required under our Paris commitments beyond the current 2030 target,” she added.

Amanda McKenzie, chief executive of non-profit Climate Council, echoed this view, stating that “disappointingly, the Finkel plan does not pass the climate test”.

“Ultimately if the scheme goes ahead emission reductions must be much stronger,” she added. 

Other recommendations Finkel and his team made include requiring power generators to give three years’ notice of their intention to close so that plans can be made to replace the lost capacity; the establishment of a register of expected closures to help with long-term investment decisions; and an integrated plan for the entire energy grid to help preserve grid security and inform investment decisions. 

“Our electricity system is entering an era where it must deal with changing priorities and evolving technologies,” said Finkel in a statement. “If the world around us is changing, we have to change with it.”

His review comes after months of upheaval in Australia’s energy sector including widespread blackouts in South Australia last December, heated public confrontations between state and government officials on the reliability of renewable energy, and the controversial closure of the Hazelwood power plant in Victoria in March this year.

“If we adopt a strategic approach, we will have fewer local and regional problems, and can ensure that consumers pay the lowest possible prices over the long term,” added Finkel.

Disappointingly, the Finkel plan does not pass the climate test. Ultimately if the scheme goes ahead emission reductions must be much stronger.

Amanda McKenzie, chief executive officer, Climate Council

Mixed reviews

In addition to criticisms that the report fell short of Australia’s climate goals, experts also questioned the “technology neutral” nature of the CET, which would incentivise fossil fuel-based power sources such as coal with carbon capture and storage, as well as natural gas.

ClimateWorks’ Denis-Ryan cautioned: “If the Government decides to introduce a CET it needs to make sure it’s not incentivising technology that is in conflict with Australia achieving net zero emissions by 2050.”

Liam Wagner, a lecturer in energy economics at Griffith University, accused the report of “rais(ing) the white flag to gas, nuclear, and carbon capture and storage options” despite their severe limitations. For instance, natural gas is expensive, while nuclear energy has not yet been proven viable for Australia, said Wagner. 

“The Finkel review has failed to excise itself from the previously identified pitfalls of non-renewable energy technology highlighted over the past 10 years,” he added. 

Others, meanwhile, were more hopeful.

Ken Baldwin, director of the Australian National University’s Energy Change Institute, said that “the Finkel Review provides carefully considered measures to bring the national electricity market into the 21st century”.

“The review’s recommendations provide politicians with the tools required for a much-needed bipartisan approach to meet our energy security, affordability and sustainability goals,” added Baldwin. “These tools will provide the policy certainty required for the urgent multibillion dollar, multi-decadal investment by industry.” 

Anthony Vassallo, Delta Electricity Chair in Sustainable Energy Development at the University of Sydney, added that Finkel’s recommendation for a CET “is essential because it sends a signal to investors that a stable policy will prevail, allowing large and/or long term projects to secure funds.” 

He added: “While certainly a compromise in some quarters, his recommendations could form the basis of a sensible long-term strategy to reduce emissions from the electricity sector while keeping prices under control.” 

Bipartisan action now

Despite these differing views, one area of near-unanimous consensus among experts was the urgent need for Australian policymakers to translate the recommendations into policy. 

Baldwin said: “Governments should take the recommendations of the review on board and consult with experts at the cutting edge of energy research to continually evolve our energy systems.” 

Kylie Walker, head of Science and Technology Australia, an organisation that represents the interests of Australian scientists, urged “a speedy, decisive and bipartisan response to the Chief Scientist’s Independent Review into the Future Security of the National Electricity Market.”

“We are keen that both sides of politics move to take full advantage of this opportunity to modernise our energy policy, and support the growth of a strong clean energy sector while taking significant steps in the important work of reducing CO2 emissions,” she added. 

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