Article: Stumbling into the transition – how energy policy reform can clear the path

By Kirstin Crothers


The Energy Policy Forum at Energy Week is where ‘policy wonks’ from the energy sector gather to examine future directions for energy policy and reform. Four experts who’ll be joining us this year were kind enough to share their thoughts on some of the most pressing issues in energy policy today.

  • Phil Blythe, Founding Director, Climate Tech Assembly
  • Elizabeth Molyneux, General Manager Policy and Markets Regulation, AGL Energy
  • Tennant Reed, Head of Climate, Energy and Environment Policy, Australian Industry Group (Ai Group)
  • Jill Cainey, Consultant, Erne Energy


Need for agility and coherence in future regulatory framework

The pressures of a system undergoing tremendous change should create opportunities for reform. All our experts agree the transition is a chance to build greater agility and transparency into the energy system. Phil Blythe and Jill Cainey used almost exactly the same language when they said, “We need agility in our regulatory frameworks” (Phil) and “The most critical element in our framework is agility” (Jill).

Phil explained the current system is based on a highly regulated and unnecessarily rigid ‘supplier to consumer’ model, which is unlikely to bring about equity for all participants in future. Jill said the system needs to be more responsive to changing conditions. One of her specific concerns is that “regulatory approvals delay and discourage the investment needed for renewable generation and networks.”

The need for a coherent energy system was another constant theme. Tennant Reed described this as, “joining the dots between policy, market rules and regulatory processes”. Elizabeth Molyneux agreed, saying it is critical there is “bipartisan collaboration between government, industry and regulators.”

The risk of not reforming the system is clear: increased costs for both the private sector and domestic consumers. The transition will make inequities and inefficiencies worse. Focussing on practical steps to minimise the cost of the energy transition will give us what Tennant describes as “a national advantage in energy”; failure to effectively reform regulation will limit growth and increase the cost of living.


Quick, quick slow – the reliability and sequencing dance

If we are to embrace the transition, there will be risks to reliability, but not changing absolutely dooms us. All our experts were united in saying that decisive action must be taken. Elizabeth says, “we cannot take 20th century thinking into the future” and Jill agrees, noting that the next federal 3-year term is “our last chance to take bold action to deliver an energy vision that limits the impact of climate change”.

Tennant says that the rapid retirement of existing (fossil fuel) generation makes it vital that we move quickly on reforming the rules to allow for flexibility. Phil agrees, saying we need to keep options open so we have room to tweak strategies in the future. “There is a huge volume of change required, and much of it will be slow and painful, so we should progress forward assuming things will take longer than we initially suspect.”

Phil suggests we use our best tools and most promising technologies now and make final decisions down the track when options are clearer. In his assessment, “the worst outcome is realising we don’t have options.” The example he gives is of our current reliance on coal for system reliability – with no real options for pivoting quickly away to other energy sources.

Although Australians are accustomed to an extremely robust energy system, Phil predicts that “security and reliability challenges will be part of life, but not a reason to panic”. Elizabeth echoes this sentiment, warning that “it will not be possible to sequence these changes neatly”. But as Jill notes, NOT changing carries its own risks, noting “continuing policy uncertainty and regulatory sluggishness will hamper the investment needed to ensure future reliability”.


Sharing the costs of the transition equitably

The scale of the transition is laid out starkly by Jill; “We need to build a quarter (10,000km) of our current NEM (40,000km) in less than 10 years (before 2030), when our current grid took nearly 60 years to build.” She is similarly direct about who should NOT pay; “the investment required should not be levied via electricity bills.”

On this, our experts are unified: current funding arrangements are inadequate and unfair, particularly to vulnerable customers who are already disenfranchised from rooftop solar to reduce electricity costs. Elizabeth includes businesses that have no ability to improve energy productivity as customers who need relief from increased electricity prices. She feels that “impacts on vulnerable customers and businesses need to be at the forefront of policy decisions”.

Phil is critical of the economical rationalist model that is the basis for current funding arrangements, noting that it imposes tariffs that are not cost-reflective and has embedded subsidies that distort who ends up paying. He is not alone in criticising existing funding methodologies. Jill nominates the mechanism currently used to fund transmission, which can benefit entities who do not contribute. Elizabeth would like to see reform to make tariffs more cost-reflective.

So, who should pay for the investment required to service a distributed renewable energy system?

Phil calls for “new approaches to government support, ones that are more consistent across the states and territories.” Tennent puts the responsibility for equitable funding at a federal level; “The Commonwealth has the fiscal capacity and national perspective to spread the benefits of transition and ease its headaches”.

Jill says. that the once-in-a-generation clean energy investment which the transition requires, should be supported by “all Australians, through a national fund”. But Elizabeth contends that rather than relying on taxpayer funds, the government should deploy private capital to drive the transition.

All agree that a consistent plan for funding the transition is needed to avoid what Jills describes as an “ad hoc mish-mash stumble into the future.”

Let’s hope our politicians are brave enough to set farsighted policy!

Hear from Phil BlytheElizabeth MolyneuxTennant ReedJill Cainey and a host of energy leaders in the Energy Policy Forum at Australian Energy Week. 

To access the detailed conference program, download the brochure here.

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