Cleaner Power Generation

To achieve this, a Shorten Labor Government will:

  • Ensure the National Electricity Market meets the needs of 21st century consumers through an Electricity Modernisation Review;

  • Develop a long-term plan to ensure the orderly transition of Australia’s energy generation from polluting coal-fired power stations to renewable and clean energy, with a core focus on supporting workers and communities; and

  • Implement an electricity emissions trading scheme.

A transition is needed to modernise Australia’s electricity sector. Labor’s plan will establish an orderly pathway for this transition. Australia’s electricity generation sector is the largest source of carbon pollution in the economy, producing around one third of the nation’s pollution. It simply must get cleaner.

Orderly transition

A cap on emissions is not on its own sufficient to manage the transition in our electricity sector from high emissions production in an orderly way.

Labor’s plan will guide the orderly transition of generation from old coal fired power stations to new clean energy. The transition is already underway – and our plan will ensure there is proper support and assistance for impacted workers and communities. The principles for this transition are laid out below.

“The Australian Energy Market Commission (AEMC) notes that: ‘Overall, wholesale electricity prices, and the resultant effects on consumers, are minimised under this approach. This is because low emissions generators are rewarded with an additional source of revenue every time they generate, which will be reflected in lower offer prices due to an incentive to ensure they are dispatched in order to create credits. Importantly, however, high emissions generators are only penalised to the extent their emissions intensity is above the baseline’.”

Electricity Modernisation Review (EMR)

A broad review of the National Electricity Market (NEM) will ensure that its Objective, law, rules and operations are consistent with the needs of Australian consumers in the 21st Century. In particular, the review will:

  • ensure the system takes proper account of the need to reduce pollution levels in electricity generation; and of modern trends in electricity, including distribution and storage; and

  • ensure the orderly transition of Australia’s generation capacity from old and heavily polluting coal power to modern sources of clean renewable energy.

Labor will work with the COAG Energy Council, NEM agencies, industry, unions and energy users throughout the Electricity Modernisation Review.

When will the Electricity Modernisation Review be done?

The EMR will commence by the end of 2016 and will report within 12 months on:

  • The NEM framework to ensure it is consistent with the needs of consumers in the 21st Century and takes proper account of the objectives of decarbonising the electricity sector consistent with national emission reduction targets; and

  • A framework to modernise the electricity industry to ensure continual supply as we transition from coal-fired power to modern, clean power sources.

Electricity Emissions Trading Scheme (ETS)

Under Labor, electricity generation will be covered by a “cap” on carbon pollution that reflects a proportional share of the overall emissions reduction task set for the broader ETS. Each generator will be allocated a baseline that is calculated according to a sector-wide emissions intensity baseline.

Labor will implement the model proposed by the Australian Energy Market Commission for electricity generators. This scheme provides for a fully internal market in carbon, which according to the AEMC will operate “without a significant effect on absolute price levels faced by consumers”.

How the electricity ETS will work:

Electricity_ETS.jpg

WHY?

Labor recognises that the electricity sector is unique to the economy, and so this package of measures has been structured to best meet our climate change targets in the most efficient way. Labor has designed policy settings to strengthen energy security, apply downward pressure on power prices, and drive the transition to clean sources of power.

Australia has one of the most emissions-intensive electricity sectors in the world, with more than 75 per cent of electricity generated from coal.

Transitioning to Cleaner Power

If Australia is to achieve its international commitments to reduce pollution levels – and to achieve net zero pollution by 2050 – it is essential to develop a methodical and structured process to decarbonise the electricity sector. This process requires a transition from heavily polluting coal-fired power to modern, clean power sources – particularly renewable energy.

Labor will introduce a framework to begin to withdraw the older, heaviest polluting generators from the market consistent with the principles set out below. Labor will also develop a longer term framework to drive that transition, based on advice from the Electricity Modernisation Review. Given the excess capacity in the market, the age and emissions intensity of some generators, and the need to reduce pollution levels from the electricity sector, the electricity sector itself is increasingly supportive of such a framework being developed and implemented.

Labor considers that such a framework should include the following principles, to be developed further with the industry, unions, user groups and State governments, as part of the Electricity Modernisation Review.

“Over many years, Australia has consistently demonstrated we have some of the best minds and some of the most innovative businesses that are hungry to drive the transition to a clean energy future“

Case study

Alinta’s announcement of the closure of its two power stations at Port Augusta in South Australia and the associated coal mine at Leigh Creek involved minimal notice, no broader planning, and little consideration of the community and worker impacts. It took months for the Turnbull Government to respond at all to that announcement and, in the end, its response amounted to a Structural Adjustment Package capped at just $1.3 million for 450 workers.

This is far from ideal. Labor’s methodical process will minimise the chances of similar events occurring in the future.

Framework Principles:

1. Labor considers that any withdrawal of an existing generation plant should be subject to an orderly process that focuses in particular on:

  • the emissions intensity of that plant; and

  • the overall reliability and affordability of supply in the market.

2. Consistent with the decision of the COAG Energy Council of December 2014, Labor will not use taxpayers’ money to pay companies to withdraw generation from the market. Labor’s focus in government will be on supporting workers and communities affected by any such closures.

3. Labor prefers a market-based approach to ensuring an orderly process of withdrawing the heavy polluting plants. Various ideas are currently being explored and advocated within academic and industry circles. One example is set out in the 2015 ANU Working Paper by Frank Jotzo and Salim Mazouz, which while requiring further development and consideration:

  • Avoids the pitfalls of government payments for closure and the information asymmetries inherent in such a payment system; and

  • Places the responsibility of funding the costs associated with such closure on the industry (which benefits ultimately from this orderly approach) and not taxpayers through the Federal Budget.

4. A central principle of the Paris Agreement – signed by Malcolm Turnbull on behalf of Australia – is that Government must ensure that the transition to a clean energy future is a “Just Transition” for impacted workers and communities.

  • The “Just Transition” commitment is consistent with Labor’s longstanding approval to dealing with the impact of economic change on workers and communities, exemplified by the Hawke and Keating governments.

  • Labor will establish a Just Transition Unit in the Department of Environment to co-ordinate the work of different Commonwealth agencies to the implementation of that element of the Paris Agreement.

  • The unit’s work will focus initially on transition in the electricity sector, and will draw on advice from a tripartite Council that brings together governments (including local government), industry and unions.

5. The management of an orderly process of withdrawing a generation plant and any directly associated assets (such as mines) should be seen as a matter for the entire industry within an identifiable region; rather than just for individual companies and their separate workforces.

  • In the same way that the framework for determining an orderly approach to closure should be an industry-wide framework, so too should be the approach to dealing with the employment and community consequences of such closure.

6. As part of the “Just Transition” commitment, Labor will develop a regional approach to employment issues associated with the withdrawal of generation capacity, which groups all generators within each identifiable region. Our approach is based on communities. It will see:

  • opportunities for redundancies arising from any closure spread across all generators/mines in the region with a pooled or brokered process and funding arrangement; and

  • ongoing staff from the closing generator/mine offered redeployment to the remaining generators consistent with the overall impact on job numbers, and with pooled or brokered arrangements dealing with matters such as continuity of service.

7. Other employment impacts associated with Labor’s plan to transition our energy mix (such as access to retraining and relocation and the impact on superannuation and pension entitlements) would be considered by Government on the basis of advice from the Just Transitions Advisory Council, consistent as far as possible with the principle of shared obligations and opportunities.

8. Just Transition also demands a proactive program of economic diversification for impacted regions and communities.

  • Labor will work with relevant State and Local Governments and business to develop these programs – which will be factored in to the market-based approach.


Want more details?

Download the summary fact sheet here 
or download the full policy document here.