South Australia’s Role in National Energy Policy

As governments around the world struggle to make the transition to low carbon, high renewables grids, South Australia’s experience offers important lessons. These include the need for political leverage to push through changes in the face of opposition from established fossil fuel interests.

It is also vital to help workers and towns adjust when coal power stations close, and to support job transitions towards sustainable industries.

Developing a National Energy Market

As climate change reshapes the world economy, a wealthy state in Australia is leading by example. In just 14 years, South Australia has undergone a sustainability transition that has seen its privately owned, market-based electricity system move from 100% fossil fuel generation to one generating about 50% from wind and solar. This has not been without controversy. In 2016, for instance, extreme weather events led to blackouts that many powerful politicians, including the federal coal-obsessed prime minister, blamed on the South Australian government’s commitment to renewable energy.

Nevertheless, this highly successful energy transition has important lessons for governments around the world struggling to make similar changes. Among them is the need for strong political leverage to push through changes, even in the face of opposition from vested fossil fuel interests. Also critical is a policy that enables the development of new technologies and allows for cost effective deployment. This requires the creation of incentives, such as tax credits and other financial mechanisms, along with regulatory structures that ensure new investment.

The SA policy also demonstrates that maintaining reliability in a renewables-dominated grid is possible. It has achieved this by using a mix of technologies, from large-scale, centralised generators to battery storage and gas. Although, as in all grids, there are times when the amount of energy produced by renewables is greater than required in the region, reliability standards have been met since 2007. In addition, SA’s plans to give its energy minister “strong new powers” to direct the national market in case of a shortfall show it is willing to take risks to lead.

As the world struggles with energy issues, SA is demonstrating how a government can dramatically reduce emissions, even in a privately owned, market-based electricity system, and set an example for the rest of the country (and the world). The state also has ambitions to scale up its clean hydrogen industry. This could enable it to become a regional, then international exporter of zero-emissions power and other low-carbon products.

As part of a federation, Australia’s six states and two territories each have responsibility for energy regulation. The federal government, however, has constitutional responsibilities for international treaty compliance such as the Kyoto Protocol on greenhouse gases and other climate change mitigation measures. As a result, intergovernmental arrangements play an important role in policy-making across the nation. This is especially true for energy policy.

Developing a National Electricity Market

South Australia’s success in shifting from fossil fuels to renewable energy and storage has been remarkable. In just 16 years, the state has gone from below 1% renewables to over 70% and is on track for 85% by 2025. It is also exporting clean energy and developing a hydrogen industry (Davies, 2018).

However, its experience has highlighted some barriers that will need to be addressed nationally, including the need for a comprehensive climate policy framework. This needs to include a commitment to net zero emissions by 2050, with clear targets and policies for decarbonisation of heavy industries and the power sector. It should explicitly consider health impacts and the need to ensure retraining and support for workers who lose jobs in the transition away from fossil fuels.

Similarly, the electricity system needs to be reformed to support more renewables and energy storage. It is currently dominated by privately owned generation, transmission and distribution businesses that are locked into long term contracts at high prices. To lower prices, the system needs to become more flexible with different tariffs and the introduction of new technologies such as demand management systems to reduce peak load.

This will need to be supported by a network that is designed for the transition, including investments in new transmission infrastructure. Several projects are being developed, including a AUD 1 billion underground cable from the Adelaide Hills to the North Eastern suburbs and a AUD 3.5 billion investment in a new high voltage line linking the Northern suburbs to the East Coast mainline. Another project is the Petratherm Enhanced Geothermal System that will use the hot granite at the base of Mount Roland to generate electricity without any mining.

The State government’s announcement of an energy plan that includes storage and a new gas plant shows it is not prepared to wait for national reform. It may encourage other states to take more decisive action to decarbonise their energy supplies and move towards a low carbon future. It could even galvanise a review of the NEM that will result in improved market design and greater opportunities for states to take leadership on energy-climate issues.

Developing a National Gas Market

South Australia is a state in the southern hemisphere of Australia. Its climate is very hot, with average summer temperatures of 84 degF (29 degC). The region is arid with very low rainfall. It has an important agriculture sector.

It also has significant natural resources such as wind, solar, and gas. The SA government has been using its energy transition as an opportunity to boost innovation and reskill workers, creating green jobs. It is also focusing on developing the clean hydrogen industry. It is investing more than three quarters of a billion Australian dollars to accelerate new projects and shipping infrastructure through the Hydrogen Jobs Plan.

South Australia’s renewable energy capacity has grown rapidly over the past decade, partly as a result of government policy initiatives. It is now a leader in both rooftop solar and battery storage, with the highest uptake of these technologies in the country. It has switched off its last coal power plant, and is a national leader in the adoption of electric vehicles.

The SA government has a strong commitment to the energy transition, including an ambitious target of 100% net renewable electricity by 2050. It has also taken a leadership role in addressing climate change risks and impacts. It has a long history of reporting on its climate impacts, risks and actions to CDP’s States and Regions disclosure process, making it one of the first subnational governments to do so.

It is the only Australian state to have a dedicated energy minister, and has a comprehensive strategy for achieving its targets. The state government also has a clear vision for the future of its economy, highlighting the opportunities presented by the energy transition. It has a robust public-private partnership to deliver its Our Energy Plan, which includes the construction of a high voltage direct current (DC) transmission system linking SA to Queensland.

The SA state government has been a key driver of Australia’s energy transition and its most successful in terms of meeting its policy targets. However, it is facing challenges from the federal government, which has claimed that it can’t “keep the lights on” – a reference to its criticism of the state’s reliance on wind energy, which it has blamed for the blackouts in 2017. The COAG Energy Council review is looking at ways to align climate and energy policies, but will not necessarily resolve any mismatches between state and national policy.

Developing a National Renewable Energy Market

South Australia has become a global leader in renewable energy. From less than 1% of electricity generated from renewable sources in 2007, it now generates more than 60% of its power from renewables, and is on track to reach 100% by 2030. This remarkable achievement offers vital lessons for other jurisdictions attempting to transition from a fossil fuel dominated grid to one that is low in emissions and high in renewables.

South Australian policymakers and activists have played a critical role in enabling this shift by establishing an environment in which the private sector could make profitable investments. They have also pushed for policies that enable the state to maximise the economic and social benefits of the transition.

These policies have been shaped by the unique circumstances of the state, including its abundant wind and solar resources, high residential electricity prices, and network challenges. However, they have also been supported by public policy initiatives, including the national Renewable Energy Target and the ACT reverse auction schemes, which encouraged investment.

In addition, South Australia has favourable planning laws that allow the co-existence of large scale renewable energy with agricultural activities. These factors have helped to drive the rapid uptake of renewables.

As the nation grapples with reliability issues, South Australia has sought to bolster its system security by introducing legislation that would give the state energy minister strong new powers in case of electricity supply shortfalls. The federal government has raised concerns that this might be illegal, and SA is seeking legal advice.

The development of a new power system will require the co-operation of both levels of government. The federal Constitution does not include specific powers relating to energy policy, so the governance arrangements for the National Electricity Market (NEM) rely on cooperation between the states and federal government. This requires the parties to take a comprehensive approach to policy-making and implement measures that ensure the stability of the NEM. This will also allow the national economy to reap the benefits of renewable energy. Traditional one-way power systems delivering electricity to homes and businesses are transforming into modern, two-way networks that support the generation, storage, and export of energy from rooftop photovoltaic (PV) panels, batteries, and electric vehicles.