Govt told back off, let power market work
Summary: The former head of the government's green bank says it is AGL that has given the market certainty by announcing when it wants to close coal-fired generators.....
The best thing the Turnbull government could do to prevent energy shortages is to get out of market's way and let the regulator do its job.
That's the view of Oliver Yates, who headed the government's green bank for more than four years until May.
The government has been contemplating how to make energy giant AGL keep open the ageing Liddell coal-fired power station beyond its planned 2022 closure.
But Mr Yates says it's actually AGL who has given the market certainty by announcing two years ago its intentions to close the Hunter Valley plant.
"Even under the Finkel review they're only requiring ... that a coal-fired power station give three years' notice; AGL gave about seven," he told ABC radio on Wednesday.
That meant the industry was working to replace the capacity based on a certain projected closure date.
"That's very difficult if a prime minister walks into the room and basically says, 'Well I know you've been investing on that basis ... but I think I might just decide to legislate in some way and keep these clunkers open'," Mr Yates said.
"That doesn't help the market at all, it puts us into a position of paralysis all over again."
Energy policy in Australia isn't broken but it is highly polarised and that's a problem, Mr Yates said.
The government's latest action was sparked by a report from the Australian Energy Market Operator which warned there would need to be an extra 1000 megawatts of dispatchable power - which is able to be sent when it's needed - in the system before Liddell closed.
"What they said is the same thing I say to my kid when they want to borrow the car: If you want to borrow the car and you don't fill it up with petrol, you'll run out of petrol," Mr Yates said.
If the policy paralysis continued and AEMO didn't get the powers it needed to deal with preventing blackouts, as recommended in the Finkel review, then there likely would be shortages.
Mr Yates warned that any kind of coal-fired power station - even the newest technology, so-called clean coal - didn't have the same capacity to respond to fluctuations in demand the market needed, unlike pumped hydro or batteries.
"If the government just allowed AEMO to get on with the job of ensuring that we have a reliable and stable supply then it would probably become depoliticised," he said.