Senate committee outlines path to modernise electricity market

The report calls for urgent reforms to ensure Australia meets its 2030 and 2050 energy targets.

The Senate Select Committee on Energy Planning and Regulation (SSCEPR) in Australia was established in September 2024 to examine the institutional structures, governance, regulation, and operations of the Australian energy  market.

As the Chair of the Committee, Independent Senator David Van, stated on the final hearing day the inquiry was set up purely to find ways to do things better, such that it can achieve Australia’s goals as a nation far faster and far cheaper.

“The current process is too long, slow and leads to massive cost blowouts that consumers then must pay,” Van said.

“The transition to a low/no emissions energy system is too important to not get right. This inquiry makes solid recommendations to reduce emissions faster, ensure energy supply  and keep cost of living down for consumers.”

The committee sought to test if the energy system is being planned and governed in such a way as to promote efficient investment, operation and use of electricity services for the long-term interests of consumers.

It sought evidence on how Australia may decarbonise as quickly as possible while maintaining price, quality, safety, reliability and security of supply of electricity.

Over five hearing days, during which more than 82 submissions were reviewed and over 35 witnesses across government, non-profits and think tanks provided testimony, the committee found that the existing governance and planning framework is not adequate in an ageing energy system that undergoing rapid change.

“While there have been excellent previous reviews, such as those led by Dr Vertigan and Professor Finkel, the energy system is evolving far faster than planning and governance can keep up with,” Van said.

“In order to successfully and swiftly decarbonise our electricity system we need whole of  system plans, not just transmission, with the foresight to keep up with change and sound governance that ensures planning decisions are economically sound or are cancelled or adjusted as technology or costs change.”

The Committee heard evidence of deficiencies in the current planning and accountability arrangements including by way of example massive infrastructure projects such Project Energy Connect and HumeLink experiencing years of delays and billions of dollars in cost blowouts.

More  nimble ways to get more efficient transmission from renewable sources to  demand centres, greater storage, demand side participation and consumer energy resources being co-optimised were given as more expedient measures.

“The Committee heard concern that a private company is able to pass on the financial risk for the total cost of grid augmentation to consumers without any democratic accountability, said Senator Van.

“Billions of dollars in infrastructure spending would normally be parsed via thorough budgeting processes with a democratically elected government held to account for final decisions; this is not the case with grid infrastructure.”

The Committee’s report provides 22 recommendations covering governance, planning, consumers, and economic efficiency, aiming to address the systemic issues seen in Australia’s energy market.

Recommendations include, but are not limited to:

1. A comprehensive inquiry led by the Productivity Commission tasked with reviewing the adequacy of the planning regime, competition in the system, federal vs state planning, the economic underpinnings of large infrastructure projects, and many more aspects.
2. A series of rule changes to increase accountability across all market bodies, including the Australian Energy Market Operator to have accountability to the Australian Parliament, and require its directors to sign off on the Draft and Final ISP, attesting that the plans meet the National Energy Objectives.
3. A view to amend the Integrated System Plan’s methodology to consider a greater array of scenarios and future trajectories so that consumers can be best protected, ensuring Australia utilises the most economic and evidenced based technologies.

“The Australian energy market is at a critical juncture with the current governance and planning frameworks struggling to keep pace with the rapid transformation of the energy sector,” Van said.

The Senate Committee emphasises the imperativeness of these recommendations to place Australia back on track and to help secure a sustainable, reliable and affordable energy future for all Australians.