Kean may have found a path through the energy gridlock
By Nick O'Malley
November 9, 2020 — 12.00am
Energy policy has long been a cause of misery for Australia's politicians.
Between powerful resources and energy companies, unions, consumers and a community increasingly furious at the failure to tackle climate change, it is a car crash of competing vested interests.
NSW Energy Minister Matt Kean will deliver a significant energy road map on Monday. Credit:Nick Moir
The development and maintenance of the infrastructure needed to generate, store and move the power a modern economy demands the deployment of eye-watering piles of cash.
For all these reasons, energy policy provides endless opportunities for wedge politics within and between parties.
NSW Energy Minister Matt Kean had little choice but to wade into these potentially treacherous waters in announcing his new energy road map, as these documents are called these days.
Over the next 15 years four of the state's five existing coal-fired power stations are expected to close, starting with the Liddell power station by the end of 2023.
Even before they shut these stations, some of which are positively geriatric by world standards, will grow less reliable. They provide around three quarters of the state's power.
The first stage of the plan to replace this system was the creation of the so-called Renewable Energy Zones, announced earlier this year. In these three areas - in the state's north in New England, Central West outside Dubbo and south near Wagga Wagga - the state government will support the construction of a range of renewable energy generation and storage projects to be connected to the grid with the help of the federal government.
The road map Mr Kean will release on Monday describes these zones as modern versions of our ageing massive power generators, and lays out how they will become the backbone of a new electricity system.
The key to the announcement is an explanation of the marketplace the government will establish to attract investment.
To ensure enough generating capacity is built in the zones the government will create a Consumer Trustee, which will hold reverse auctions to award what it calls "Long Term Energy Services Agreements" to power generators.
These 20-year contracts will give the generators the option of relying on a backstop floor price to ensure their viability should prices fall too low in particular years.
Government modelling suggests that bringing this certainty to the market will attract more entrants and drive down prices.
Similar models are in place in the UK, Ireland and Finland, among other nations, and they have proved particularly useful in fostering renewable energy, where the upfront costs can be huge, but ongoing costs low as they don't need fuel to generate energy.
The road map also includes a grants program to assist would-be investors with feasibility studies for pumped hydro projects to act as batteries, storing new renewable power for dispatch when, as the government puts it, the wind isn't blowing and the sun is not shining.
Mr Kean insists that his only interest in designing the plan was to ensure stable power generation and drive down prices.
That may be so, but should it work the plan will also reduce NSW electricity emissions by 50 per cent between now and 2040.
It is worth noting that amid a sometimes bitter rivalry between NSW Coalition partners, Mr Kean secured the support of his Nationals colleagues, who are doubtlessly most supportive of the jobs boom in some of their crucial seats.
But he has gone even further, securing support from the Labor Opposition prior to the policy's release. Should he pull it off, Kean will have also laid out a road map for the rest of the nation's politicians.
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Matt Kean
Nick O'Malley
Nick O'Malley is National Environment and Climate Editor for The Sydney Morning Herald and The Age. He is also a senior writer and a former US correspondent.