A Switch in Time: Enabling the electricity sector's transition to net zero emissions Report

Apr 15, 2016 - 12:01am

Cleaning up Australia’s electricity system is central to national prosperity in a world committed to achieving net zero emissions. Failure to implement a long-term decarbonisation plan carries severe and growing risks.

To inform the development of plans to modernise and decarbonise Australia’s electricity sector, The Climate Institute commissioned one of the nation's leading electricity market modellers to assess various policy options against the transformation of the electricity system necessary to achieve emission reductions consistent with the <2°C goal.

Key Points:

1. The global switch to clean energy is an unstoppable trend, to be accelerated through the implementation of the Paris Agreement. Countries agreed in Paris to limit climate change to 1.5-2°C above pre-industrial levels. Achieving these temperature goals requires capping the total amount of greenhouse gases released to the atmosphere. This limit is known as a carbon budget.

2. Energy emissions must progressively decline to net zero by mid-century for a 75 per cent chance of limiting temperature rise to less than 2°C, and an even chance of achieving the 1.5°C goal. This can only be achieved by switching to zero or near-zero emission energy sources.

3. Australia’s electricity market lacks a framework for orderly replacement of old, inefficient and high-carbon coal stations with cleaner power. The Climate Institute commissioned modelling of policies under discussion against the emission reductions needed for the electricity sector to play its part in achieving the <2°C goal.

4. Our modelling finds a modest carbon price rising to $40 per tonne by 2030 would produce emission reductions similar to the government’s current national 2030 target of 26-28 per cent below 2005 levels, but this would result in:

  • almost no replacement of existing high-carbon power stations with clean energy;
  • a collapse in clean energy growth followed by stagnation through most of the 2020s; and
  • 98 per cent of the sector’s 30-year carbon budget used up in the first ten years. 

5. This means that climate action after 2030 would need to be more extreme – more than 80 per cent of the coal-fired generation fleet would have to be closed in less than five years and new clean energy capacity would have to jump four-fold and keep rising. The impacts of such a disruptive shift would be felt across the economy.

6. Measures that directly target an orderly phase out of high-carbon generation over the next 15-20 years and de-risk clean energy investment would smooth the sector’s emission reduction pathway and reduce the risks of disruptive adjustment in the futures. These measures are necessary for timely decarbonisation and investment predictability.

7. Australia’s electricity sector needs a policy framework that:

  • is consistent with a predictable pathway to net zero emissions by mid-century, and a 1.5-2°C national carbon budget;
  • starts systematically retiring existing high-carbon generators on a timeline that ensures all have exited by 2035;
  • facilitates replacement of high-carbon generation with zero or near-zero emission energy;
  • provides a well-funded and well-planned structural adjustment package for communities affected by generator closure;
  • strategically deploys energy efficiency policies to minimise costs to energy users and further reduce emissions; and
  • includes a carbon pricing mechanism that is capable of scaling up over time to provide a bankable signal for investment consistent with net zero emissions by mid-century. There is a low probability that a price of sufficient strength and reliability will emerge quickly, so the measures listed above are needed to deliver a timely transition. 

Click below to download the full report, and click here to navigate to the A Switch in Time project page for all associated resources.

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