Albanese government announces review into post-2030 renewables strategy

The Albanese government has launched a review of how the main power grid can accelerate the take-up of renewables when existing support ends. It ruled out examining the imposition of a carbon price on the nation’s biggest polluting sector.

The federal energy minister, Chris Bowen, on Tuesday revealed the review’s terms of reference and its four-person panel, chaired by energy veteran Tim Nelson. It will report back by the end of 2025 – well after the next federal election.

The review’s announcement came on a day electricity supplies were strained in New South Wales as a heatwave elevated demand and wholesale power prices. Conditions were likely to remain “tight” for days but supplies should remain sufficient, the Australian Energy Market Operator (Aemo) said.

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The panel will examine settings for the national electricity market (Nem) to ensure it aids investment in clean energy generation backed up by storage after the renewable energy target expires in 2030. Another federal effort, the Capacity Investment Scheme (CIS) that will underwrite 32GW of new projects, will also run out by then.

“The review will provide a comprehensive assessment of what the market will need next, once the current CIS tenders end in 2027, to ensure that investment pipeline remains strong,” Bowen said.

Joining Nelson on the panel will be: Paula Conboy, a former chair of the Australian Energy Regulator; Ava Hancock, an official who helped design NSW’s energy roadmap; and Phil Hirschhorn, a petroleum engineer who has worked with Boston Consulting Group.

It is understood the choice of the panel backed by Bowen’s department surprised observers expecting an organisation such as the Productivity Commission to conduct the review. The announcement’s timing (about 10 days before 2024’s final meeting of state and federal ministers) also caught some officials on the hop.

Dylan McConnell, an energy specialist at the University of NSW, said the first five years after 2030 were likely to be critical. That’s when many of the remaining coal-fired power stations are scheduled to shut.

In recent years, there had also been a “hodgepodge of schemes” outside the Nem itself, McConnell said. The mechanisms include the South Australian government’s recent plans for an extra firming scheme and NSW’s long-duration storage tenders.

“These are all pointing to the current market design not working or being allowed to work,” he said, adding that cooperative federalism had fragmented.

Tony Wood, a senior energy analyst who co-authored a Grattan Institute report earlier this year on the post-2030 grid, said he hoped energy ministers would support the review and its ultimate findings.

“If the ministers aren’t on board, we have a problem from the very beginning,” Wood said, noting lack of unanimity had blocked a previous effort by the former energy security board to introduce a capacity mechanism involving gas.

“What it’s really about is how do you get investment in the stuff that’s not going to be used very often … when the wind isn’t blowing, the sun isn’t shining and batteries don’t do it,” Wood said.

The Grattan report called for a market structure designed for a post-coal market and greater integration of all forms of distributed energy resources, including households’ rooftop solar and batteries. It also recommended the reintroduction of a carbon price – axed by the Abbott government – to guide investments decisions.

But the review’s terms of reference explicitly exclude a carbon price. “The expert panel will not consider options that involve implementation of carbon trading schemes, carbon markets or that entail governments supporting new fossil fuel generation,” the government said.

Rewiring Australia, a group advocating the electrification of the economy using renewables, said the review should put “consumers on the same footing as institutional investors and big energy companies”, its executive director, Dan Cass, said.

“Over the next 20 years, everyday Australians will invest up to eight times more in energy technologies including [electric vehicles] than big institutional investors,” Cass said. “They must be front and centre of this transition.”