The International Energy Agency (IEA) has released its first detailed analysis of Australian energy market in five years. It is not complimentary.

Australia’s energy policy, it says, is uncoordinated and falling behind the rest of the world on many measures. The IEA is not given to overstatement. It is an OECD agency established in 1974 to help its 29 member countries deliver reliable and affordable energy. In recent years has also focused on clean energy and sustainability as essential parts of the mix to help address climate change.

The IEA report was developed at the Government’s request. They may wish they had not asked.

“Australia has been relying on the paradigm of deregulated and liberalised energy markets,” says the report. “Despite ongoing reforms, the signs of stress in the Australian energy system have grown.

“Since the last IEA in-depth review, energy prices have remained continuously high against low levels of competition in gas and electricity markets and low consumer choice, pointing to structural challenges. Concerns have been raised that gas supplies may reach a shortage in the east coast market as LNG exports ramp up to 2022, further pushing up power prices.

“The resilience of the electricity system is being tested at a time of system transformation with old coal plants retiring and more variable renewables entering the system, but unevenly distributed across the common market, the National Electricity Market (NEM).”

The report points out that there is significant duplication of resources between the many energy bodies in Australia: the Australian Energy Regulator (AER), the Australian Energy Market Commission (AEMC) ,the Australian Energy Market Operator (AEMO), the Australian competition and consumer commission (ACCC), the Clean Energy Regulator (CER) and the Climate Change Authority (CCA).

“Energy policy governance in Australia is very complex and fragmented. It suffers from frequent changes of policy direction and institutions at Commonwealth level.”

The IEA criticises Australia’s state based radial electricity distribution system, and many other aspects of Australia’s energy system. But its harshest criticism is reserved for Australia’s climate change policy, or a lack of it.

“Despite stated ambitions of the Paris pledge, the Commonwealth government has not yet come forward with durable climate change policies after 2020 or a long-term emissions reduction goal for 2050, pending a climate policy review in 2017. A stable and longer-term framework is critical to guarantee visibility for investors and consumers alike.”

It says Australia had a higher proportion of fossil fuels in its energy mix than any other OECD country. “The CO₂ intensity of Australia’s electricity generation remains the highest among all IEA member countries and almost twice as high as the IEA average.

“The country is not subject to any effective carbon constraint or rate under the Emissions Reduction Fund and its safeguard mechanism. Current energy efficiency measures and climate mitigation policies are not sufficient. To meet its 2030 target, domestic efforts need to increase.”

The report is a damning indictment of the inadequacies of Australia’s energy and climate policy. It makes a number of recommendations to the Government, which it says should:

• Design an energy and climate policy framework for 2030 and develop a mid-century low emission development strategy based on the Finkel review.

• Improve governance through enhanced collaboration and clarified roles with states and territories through the COAG Energy Council and with market bodies of the NEM.

• Guide the energy transition through an emissions reduction goal for the power sector and provide a market signal to retire older and less efficient generation.

• Continue to foster well-functioning wholesale and retail electricity markets through the COAG Energy Council.

• Develop competitive, liquid and adequate domestic gas supplies and transportation capacity by swiftly completing the gas market reforms. Support the sustainable development of domestic oil/gas reserves by addressing community concerns.

• Regularly update the National Energy Security Assessment, in order to identify energy security risks across the energy system, and design measures to reduce or eliminate these risks in a timely and comprehensive manner.

• Foster data reporting and monitoring across all energy sectors and continue to develop data-sharing arrangements across government and agencies to improve energy data quality for analysis, policy development and the deployment of emergency measures.

It’s not a pretty picture. Australia has a fragmented energy policy, is not addressing climate change, and is doing little to address the situation. Yts the Government thinks it is doing a good job

The report is available here.

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