The chief scientist says changes the Turnbull government is contemplating to the national electricity market would take five years to take effect, whereas his proposal for a clean energy target would achieve transformation more quickly, with “enormous flexibility” for the market.



Alan Finkel’s last ditch attempt to defend his mechanism followed another public signal by the energy minister, Josh Frydenberg, on Monday that the government will not proceed with the clean energy target modelled in Finkel’s review of the national electricity market earlier this year.

The Turnbull government has been telegraphing for some time it will not adopt the target modelled by Finkel, and is looking instead at other measures, including an overhaul of the national electricity market rules, including the creation of a new “day ahead” market.

The Australian Energy Market Operator has asked the government to adopt the system – where the market operator identifies the energy demand for the next day, hour-by-hour, then generators bid in via reverse auctions to supply the market – as a clear market signal to bring more dispatchable power into the grid.

The expected overhaul of the market rules in the government’s looming energy policy overhaul is expected to be accompanied by mechanisms to reduce greenhouse gas emissions, including the use of international permits, which the government first signalled when it launched a review of its Direct Action policy.

The energy sector also expects the existing Emissions Reduction Fund, which is the Coalition’s voluntary scheme that gives incentives for farmers and landholders to reduce emissions will also have its funding topped up between now and the next election.

The government’s policy overhaul could be unveiled when parliament resumes next week, with the prime minister resolved to settle the key framework before the summer recess.

Only four sitting weeks remain this year, and that program could be disrupted in the event the deputy prime minister, Barnaby Joyce, runs into trouble with the high court, which will hear his dual-citizenship case this week.

Internal divisions within the Coalition have played out since Finkel first recommended the clean energy target in the middle of the year, with Tony Abbott driving much of the public agitation against the policy.

As part of his ongoing public offensive against the clean energy target, Abbott is due to stir the pot again by delivering the annual lecture to a London-based climate sceptic group – the Global Warming Policy Foundation.

Finkel was asked on Monday whether using reverse auctions for capacity contracts to stimulate new investment in flexible generation – an idea the government is considering – might be a better option than his clean energy target.

The chief scientist said reverse auctions had “strengths and weaknesses”, and he wasn’t convinced that central authorities running reverse auctions wasn’t necessarily the best or a better mechanism than a clean energy target.

“The advantage of a clean energy target with equivalent market-driven need to bring in low emissions energy with reliability is that you’re giving enormous flexibility to the market and investors, technologists can use the best solutions for the time,” Finkel said.

The chief scientist’s defence of his proposed mechanism was echoed by the Investor Group on Climate Change, which argued any policy produced by the Coalition that “ignored” emissions reduction was deficient.

Emma Herd, chief executive of the Investor Group on Climate Change, said: “Investors couldn’t be more clear – Australia desperately needs an effective climate change response for the energy sector.

“Without it, the investment strike will continue”.

In response to the public signal from Frydenberg that Finkel’s clean energy target was all but dead, the South Australian premier repeated earlier threats that the states would go it alone on a clean energy target.

“There is no barrier to the states simply taking the Finkel recommendations and implementing them themselves,” Jay Weatherill told an energy summit sponsored by the Australian Financial Review.

Environment group the Australian Conservation Foundation said voters were sick of Canberra’s failure to tackle climate change.

The ACF’s chief executive, Kelly O’Shanassy, said Finkel’s clean energy target “was presented as a starting point by the Turnbull government for stopping pollution – but it looks like the government is planning to abandon even this modest measure”.

“Australia’s climate policy is now looking more and more like Donald Trump’s,” she said.