Powering Down? Electricity price impacts of coal generation exit from the NEM

In order to meet Australia’s 2030 emissions reduction target, a significant change in the operation of the electricity sector will be required, driving the decarbonisation of the National Electricity Market (NEM). While bi-partisan support exists for the review of Australia’s 2030 emissions reduction target every five years, the major political parties remain divided on the best policy approach to achieve longer term emissions cuts. The government is committed to its Emissions Reduction Fund (ERF), and the Large-scale Renewable Energy Target (RET), with a review of its Direct Action Plan policy to take place in 2017-18. In parallel, the Australian Labor Party (ALP) has stated that it intends to re-introduce an electricity-generation emissions trading scheme (ETS) as it seeks to achieve a 50 per cent renewable energy goal by 2030. In order to support a market-based transition away from emissions intensive generation, a number of policy recommendations have been publicly tabled by academics and market observers. Policy recommendations have broadly taken two forms – proposals for the orderly exit of highly emissions intensive power stations from the NEM – as put forward by Frank Jotzo and Salim Mazouz (Jotzo),[1] and more recently by The Climate Institute (TCI)[2] - or proposals