Generally where the mining industry has responded publically it has been positive. The Finkel Review included many items called for in submissions from mining groups including:
• The ability of regulators to mitigate short term fluctuations in pricing and supply, especially in terms of gas generation;
• The technology neutral setting of clear targets to facilitate investment in new electricity production; and
• The removal of moratoria on gas exploration (with the review recommending an evidence based regime to manage risks associated with individual projects).
However the main industry body, the Minerals Council of Australia, has criticised the implication HELE coal generation is not considered low emissions or clean energy and the review did not recommend removal of prohibitions on nuclear energy. The Council strongly advocates for a higher threshold to enable HELE to be considered a low-emissions source.
Anecdotally, ANZ sees a strong level of interest from mining companies to install their own cleaner energy supplies, now being manifested in EOIs to renewable consortia.
Corporate and private demand for renewable generation is the main driver for investment whilst State and Federal Governments continue to argue over the merits of more aggressive State-based schemes and renewable energy targets.
We see this as not dissimilar to the industry’s response to historical infrastructure challenges such as rail and port bottlenecks, where mining groups have worked independently and in consortia to build and control supply chains.
Where do we go from here?
The emphasis of the review for an orderly transition is seen to reduce imminent asset risk for coal generators by allowing for transparent closure of older generators within their current asset lives.
Further new coal generation asset investment within Australia is seen as very difficult in the current context. Energy security is fundamental, with recommendations to ensure adequate electricity supply for summer 2017 and beyond includes implementation of Energy Security and Generator Reliability Obligations.
Another aspect is the resilience of the grid, with increased intermittent generation and rapidly advancing technological changes as well as climate change impacts.
An assessment of the resilience of the grid in relation to cyber security, weather impacts and the upskilling of the work force given technological advancements required are all recommended.
While it is unclear the path the Finkel Review’s recommendations will take in getting from recommendation to reality, one thing is apparent: the industry desperately needs clarity and certainty for the sake of future investment in Australia’s electricity in the future.
This will support viable funding solutions; uncertainty means increased risk for not only investors but financiers.
And to echo the Business Council of Australia’s position, Australia needs a clear, stable policy to deliver secure, reliable and affordable power.
Sharon Simon is Head of R&A, Utilities & Infrastructure at ANZ