Home' Future Building: The Australian Infrastructure Review : Volume 8 Number 1 Contents futurebuilding
Dr Kerry Schott AO
Another thing the Finkel Report suggests is a generator
reliability obligation for all new generators – largely renewables.
If you construct a wind farm in South Australia, you will also
be required to provide backup dispatchable power so that
supply increases at all times due to the new generator. If you
are a generator looking to close down, it is suggested that you
provide three years notice of closure. The sudden closure of
Hazelwood last April took the market by surprise. When a big
plant like that closes its doors, the market needs more time to
be able to respond. The other recommendation with regard to
supply is the formation of a strategic reserve, which AEMO is
already acting on.
Security relates to obligations on new generators to make
sure that they have fast frequency responses to cover outages
in the system. Transmission companies have an energy
security obligation, and across the grid they have to make sure
that there is enough inertia to keep everything moving. Stronger
risk management is also required around cyber threats, but
also against natural disasters. The way that transmission
towers collapsed in South Australia during the storm makes you
wonder whether the engineering specifications might need to
be reviewed. All of these elements need to be considered.
In terms of lower emissions, we need a Clean Energy
Target. We also need to set a future emissions reduction path
that is technology-neutral. The way the Clean Energy Target
works is to set a threshold, so that if a plant is operating below
the target, it receives certificates that can be traded. If a plant
is operating right on target, then it does not need to purchase
any certificates, as it’s a neutral player. If it is operating above
the target – for example, a coal-fired power station – then it
will require certificates from elsewhere, which will make the
operating costs more expensive.
We also need more capacity in the system. This means that
we need investment. There is a lot to be gained through the
demand-response mechanisms, and also in providing more
transparency and consumer choice to allow the public to make
In conclusion, there is no one single measure that is
going to fix the market. What is required is a mix of demand
response, increased dispatchable capacity, better consumer
choice and competition, and ongoing reductions in emissions
to reach ‘nirvana’ – affordable, reliable, secure, low-emissions
Dr Kerry Schott AO – Chair, Energy Security Board
Dr Kerry Schott is Chair of Moorebank Intermodal Company, is a Director of NBN, and a Director of the New South Wales Treasury Corporation. Dr Schott also
chairs the Assurance Board for Sydney Metro, and is a member of the Advisory Board for City and South East Light Rail.
Dr Schott was Managing Director and CEO of Sydney Water from 2006 to 2011. Before that, she spent 15 years as an investment banker, including as
Managing Director of Deutsche Bank and Executive Vice President of Bankers Trust Australia. During this time, she specialised in privatisation, restructuring and
infrastructure provision. Prior to becoming an investment banker, Schott was a public servant and an academic.
Dr Schott holds a doctorate degree from Oxford University; a Masters of Arts from the University of British Columbia, Vancouver; and a Bachelor of Arts (first
class Honours) from the University of New England. She was recently awarded an Order of Australia and Honorary Doctorates from the University of Sydney
and the University of Western Sydney.
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