national Policy update

Energy briefing update - December 2021

This past quarter saw a plethora of global commitments at the United Nations Climate Change Conference, as well as a number of interesting domestic policy updates:

• Glasgow climate pact agreed, but Australia cops a mixed response

• Low Emissions Technology Statement gets a refresh

• Priming the new fuel pump

• NSW Peak Demand Reduction Scheme

Australia’s newly minted net zero target met with a mixed response at the United Nations Climate Change Conference in Glasgow. While the commitment to achieve net zero emissions by 2050 was widely welcomed, much of the focus of conference – commonly referred to as COP26, or the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) – was on raising the ambition of 2030 pledges.

And while the NSW Government strengthened its 2030 target from 35 per cent to 50 per cent in the leadup to COP26, the Australian Government has left its own emissions reduction target at 26-28 per cent below 2005 levels by 2030. However, the agreement coming out of COP26 calls on countries to “revisit and strengthen” their 2030 targets in 2022, so pressure on Australia to increase its ambition will continue.

The final COP26 Glasgow Climate Pact, agreed to by the nearly 200 countries present, put the ambition to limit warming to 1.5 degrees front and centre, called for a “phase down” of unabated coal use, and finalised long-awaited rules for how international carbon markets will operate.

Beyond the Pact, several major new pledges were agreed on the sidelines. The Global Methane Pledge saw more than 100 countries, including the US and the EU – but not, so far, Australia – sign on to cut their methane emissions by 30 per cent by 2030. Signatories represent almost 50 per cent of all man-made methane emissions, which are a potent contributor to global heating. There were also commitments on climate finance, and 46 countries including the UK, Canada and Poland, pledged to phase out domestic coal use.

The complete list of COP26 outcomes can be found here.

In the second annual Low Emissions Technology Statement (LETS) to the Technology Investment Roadmap, released on 2 November 2021, the Australian Government has signalled three new emissions reduction priorities, including:

• Developing ultra low-cost solar;

• A digital energy grid; and

• EV and hydrogen fuel cell vehicle charging networks.

These three priority areas were added to the existing technologies as they have significant commercial and investment opportunities for long-term emissions reduction under the Roadmap. 

The LETS notes an “economic stretch goal” to reduce the cost of solar electricity generation to $15/MWh, a third of today’s cost. The development of a digital grid, battery charging and hydrogen refuelling stations have been added under a new category called enabling infrastructure, in addition to the priority technologies and emerging technologies categories included in the 2020 LETS. The category has been added to recognise that growth in wind and solar generation depends on grid improvements, while consumer demand for zero-emissions vehicles requires access to recharging and refuelling networks. Achievement of these goals will largely be driven by global deployment rates, though Australia’s investments will contribute to a degree.

More information can be found here.

The Federal Government’s Future Fuels and Vehicles Strategy, released on 9 November 2021, aims to modestly reduce emissions in the transport sector by expanding the Future Fuels Fund to $250 million and targeting new areas of investment in charging infrastructure and vehicle fleets. The strategy also expects to leverage the funding by attracting private and state government partnerships. 

The strategy zeroes in on four key areas for co-investment:

·       Public EV charging and hydrogen refuelling infrastructure;

·       Household smart charging;

·       Heavy and long distance vehicle fleets; and

·       Light vehicle commercial fleets.

The government believes that the strategy will see charging infrastructure rolled out in “over 400 businesses, 50,000 households and 1,000 public charging stations.”

More information can be found here.

As more variable renewable energy enters the electricity system, smarter energy management – managing how and when energy is used over the course of the day – is becoming increasingly necessary. That’s why in September, the NSW Government published its plan to support businesses and households to reduce peak electricity demand via the Peak Demand Reduction Scheme (PDRS). The PDRS will complement the current Energy Savings Scheme (ESS) that supports energy efficiency upgrades, incentivising businesses and households to install smart equipment that uses energy at times that maximise benefits both for the consumer and the electricity system – in the form of reduced costs and increased reliability. The PDRS will launch in November 2022, and along with the ESS is estimated to save businesses and households $3.6 billion in energy costs between 2022 and 2040.

NSW also announced a related scheme to incentivise the use of green hydrogen as part of its Hydrogen Strategy. As currently proposed, the scheme would target meeting the equivalent of ten per cent of NSW gas demand with hydrogen by 2030. Details will be finalised in the coming year.

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