Integrated Policies to Reduce Australia’s Electricity Sector Greenhouse Gas Emissions to Net Zero by 2050

Abstract

Recent events within the Australian National Electricity Market have demonstrated that the system of an energy-only market (a market that only compensates power that has been produced) is no longer fit for purpose. The rate of change in installed capacity and generation requires better planning to ensure reliability is maintained at the lowest total system cost during the transition to net zero. Australian National Electricity Market participants will need sufficient incentives and confidence to invest in new capacity. This paper assesses a “no constraints” scenario and recommends a range of policy and market mechanisms that could be utilized to achieve a net zero National Electricity Market in Australia by 2050. This paper adopts the perspective of total system cost, which allows multiple factors relating to decision-making to be incorporated. In the absence of a carbon price, this paper seeks to put forward technology-based policy and market mechanisms to incentivise the changes required. The “Modelling Energy and Grid Services” model used in this study has shown that this “no constraints” future grid will need to contain approximately 100 GW of variable renewable energy, almost 20 GW of firm, low-emissions generation, such as carbon capture, utilisation and storage, bioenergy with carbon capture and storage, hydroelectric power, or nuclear power. It will also require more than 10 GW of storage, including pumped hydro energy storage and other energy storage technologies, and over 30 GW of firm, dispatchable peaking plants, including thermal power generation.