EUAA Submission: Capacity Investment Scheme Implementation Design Paper
Emily Wood | March 25, 2024
‘… Recognising that the current version of the CIS has significantly expanded objectives both in scope and scale (23GW of generation and 9GW dispatchable capacity) we remain concerned that dispatchable capacity aspect of the CIS will tend to support relatively short duration storage (i.e. 2-6-hour batteries). While this may be acceptable within the context of recent life extensions of existing thermal generation, further work must be done to ensure inter-day capacity gaps are met. In particular we are yet to understand how the required 16GW of gas generation identified by AEMO in the draft 2024 ISP1 will participate in an environment where short duration capacity continues to be underwritten by the CIS. While we don’t address this question in this submission, there is an urgent need to resolve this issue, especially given the accelerating pace of fossil fuel asset closures.
POLICY OPTIONS – VRE DEPLOYMENT AND 82% BY 2030
The federal government target of 82% renewable energy by 2030 was always ambitious, even before world events profoundly impacted international supply chains and escalating costs driven by a global decarbonisation race. We understand the pressure on the federal government to provide more “policy support” for the deployment of renewable energy technologies. In particular the push to significantly expand (both in scale and timeframe) of the consumer funded Large-Scale Renewable Energy Target (LRET).
We estimate that the current consumer funded subsidy for the LRET amounts to approximately $1.65 billion per annum2. Over the full course of the federal scheme (commenced in 2000 and concluding in 2030) the total consumer funded subsidy for large scale renewable energy is estimated to be $30 billion. This does not include the costs associated with the Small-Scale Renewable Energy Scheme (SRES), state-based incentives, transmission augmentation, system strength remediation, storage etc, a vast majority of which ends up on consumers energy bills.
Renewable energy is in a very strong position to continue its march forward. As a result of the extended period of policy support described above, renewable energy has come to dominate the energy investment environment.
According to the most recent CSIRO GenCost Report3, renewable energy represents the least cost energy generation technology (on an LCOE basis) even when transmission4 and firming costs are included. It is clear that renewable energy is the favoured technology by investors and that there is a strong commitment from government to drive the rapid exit of coal fired power stations. There is also very strong non-legislated demand for renewable energy as large commercial and industrial energy users continue to seek long-term power purchase agreements to meet net zero and ESG targets.
Given all of these advantages the question must be asked, when does the public, either as energy consumers or taxpayers, cease underwriting the expansion of renewable energy? Assuming the 82% by 2030 target is reached, the renewable energy industry will simply be the energy industry. Is the expectation that public support is required to not only achieve 82% by 2030, but beyond this date? At what point does public support reduce and we revert to the energy market (in whatever future fit for purpose form it takes) being the primary driver of investment decisions?…’
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