Article contents
The Australian Energy Transition as a Federalism Challenge: (Un)cooperative Energy Federalism?
Published online by Cambridge University Press: 05 March 2021
Abstract
The law and regulation of the energy sector in Australia is subject to overlapping responsibilities of both federal and state governments. Crucially for energy transition efforts, neither energy, environment nor climate is mentioned in the Australian Constitution. Australia has a tradition of creative cooperative federalism solutions for responding to problems of national importance. In the energy sector this has resulted in an intricate national framework for energy markets, which relies on mirror legislation passed by participating states, with oversight by state and federal executive governments. Independently of these frameworks, both federal and state governments have passed climate change legislation, which crucially includes renewable energy support mechanisms. At a time when a rapid transition to a decarbonized energy system is essential, legal frameworks struggle to respond in a timely fashion. The political discourse around energy has become increasingly toxic – reflecting a dysfunctional state–federal relationship in energy and climate law. Australia needs to consider whether its cooperative federalism solutions are sufficient to support the energy transition and how climate law at the state and federal levels interacts with energy market legal frameworks.
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Footnotes
This contribution is part of a collection of articles growing out of the workshop ‘The Law of Energy Transition in Federal Systems’, held by the University of Tübingen, Faculty of Law, and the University of North Carolina at Chapel Hill, School of Law, in Tübingen (Germany), 27 June 2019.
This article benefited greatly from the workshop on Energy Federalism at the University of Tübingen. It draws on material from my unpublished PhD thesis: A. Kallies, ‘How Do Legal and Regulatory Frameworks of Liberalized Electricity Markets Influence the Promotion of Renewable Energy? Lessons for Australia from International Case Studies’ (PhD thesis, Melbourne Law School, University of Melbourne, 2015). I would also like to thank my colleague Vanessa Johnston and three anonymous TEL reviewers for their very helpful comments.
References
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6 The latter has some level of independence and statelike powers.
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35 Predominantly in s. 51 of the Australian Constitution.
36 Australian Constitution, s. 107.
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39 New York, NY (US), 9 May 1992, in force 21 Mar. 1994, available at: https://unfccc.int/resource/docs/convkp/conveng.pdf.
40 Australian Constitution, s. 51(xx).
41 Commonwealth v. Tasmania (1983) 158 CLR 1.
42 Paris (France), 12 Dec. 2015, in force 4 Nov. 2016, available at: http://unfccc.int/paris_agreement/items/9485.php.
43 Government of Australia, ‘Australia's Intended Nationally Determined Contribution to a New Climate Change Agreement’, Submission to the UNFCCC Secretariat, Aug. 2015, available at: https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Australia%20First/Australias%20Intended%20Nationally%20Determined%20Contribution%20to%20a%20new%20Climate%20Change%20Agreement%20-%20August%202015.pdf.
44 Australian Constitution, ss. 51(xx), (i), respectively.
45 A. Kallies, ‘A Barrier for Australia's Climate Commitments? Law, The Electricity Market and Transitioning the Stationary Electricity Sector’ (2016) 39(4) UNSW Law Journal, pp. 1547–82, at 1576; Lyster & Bradbrook, n. 37 above, p. 118.
46 Commonwealth v. Tasmania, n. 41 above.
47 R. French, ‘Horizontal Agreements: Competition Law and Cooperative Federalism’ (FCA) [2007] Federal Judicial Scholarship, article 6 (speech presented at the Competition Law Conference, Sydney (Australia), 5 May 2007), available at: http://www.austlii.edu.au/au/journals/FedJSchol/2007/6.html.
48 Ibid.
49 Australian Constitution, s. 128.
50 See, e.g., R. Creyke et al., Laying Down the Law, 10th edn (LexisNexis Butterworth, 2018), p. 99.
51 Australian Constitution, s. 51(xxxvii) (‘referral power’).
52 French, n. 47 above.
53 Ibid.
54 R. French, ‘Cooperative Federalism: A Constitutional Reality or a Political Slogan?’ (FCA) [2004] Federal Judicial Scholarship, article 21 (speech presented at ‘Western Australia 2029: A Shared Journey’, State Conference’, 17–19 Nov. 2004), available at: http://www.austlii.edu.au/au/journals/FedJSchol/2004/21.html.
55 C. Saunders, ‘Cooperative Arrangements in Comparative Perspective’, in G. Appleby, N. Aroney & T. John (eds), The Future of Australian Federalism (Cambridge University Press, 2012), pp. 414–31, at 416.
56 T. Hueglin & A. Fenna, Comparative Federalism: A Systematic Inquiry, 2nd edn (University of Toronto Press, 2015), p. 238.
57 Saunders, n. 55 above, p. 414.
58 House of Representatives Standing Committee on Legal and Constitutional Affairs, Reforming Our Constitution (Commonwealth of Australia, 2008), Ch. 4, p. 35, para. 4.6, available at: https://www.aph.gov.au/parliamentary_business/committees/house_of_representatives_committees?url=/laca/constitutionalreform/report.htm.
59 See, e.g., ibid., p. 36, para. 4.13; Saunders, n. 55 above, p. 414.
60 For further detail. see Kallies, n. 45 above.
61 D. Sharma, ‘The Multi-Dimensionality of Electricity Reform: An Australian Perspective’ (2003) 31(11) Energy Policy, pp. 1093–102, at 1094.
62 Starting with the Heywood interconnector between Victoria and South Australia in 1990.
63 Including two interconnectors each between Victoria and South Australia (Murraylink and Heywood), and New South Wales and Queensland (Directlink and the Queensland-NSW interconnector), respectively; only single interconnections exist between New South Wales and Victoria, and Tasmania and Victoria (Basslink): Australian Energy Regulator, ‘State of the Energy Market 2018’, 17 Dec. 2018, p. 133, available at: https://www.aer.gov.au/publications/state-of-the-energy-market-reports/state-of-the-energy-market-2018.
64 Ibid., p. 75.
65 A detailed explanation of the complicated market rules is available at Watt Clarity, ‘Beginner's Guide to How Dispatch Works in the NEM, and hence How Prices Are Set’, 3 Aug. 2018, available at: http://www.wattclarity.com.au/articles/2018/08/beginners-guide-to-how-dispatch-works-in-the-nem-and-hence-how-prices-are-set.
66 See, e.g., Australian Energy Regulator, ‘The Black System Event Compliance Report’, Dec. 2018.
67 Australian Energy Regulator, ‘Quarterly Interregional Trade as a Percentage of Regional Energy Consumption’, available at: https://www.aer.gov.au/wholesale-markets/wholesale-statistics/quarterly-interregional-trade-as-a-percentage-of-regional-energy-consumption.
68 See Western Australian Economic Regulation Authority, ‘Electricity’, updated 18 Dec. 2018, available at: https://www.erawa.com.au/electricity. See also Northern Territory Government, Department of Treasury and Finance, ‘Electricity Market Reform’, updated 12 June 2020, available at: https://treasury.nt.gov.au/dtf/economic-group/electricity-market-reform.
69 Australian Government, Department of Industry, Science, Energy and Resources, ‘Australian Energy Statistics’, 26 May 2020, available at: https://energyd8.govcms.gov.au/publications/australian-energy-statistics-table-o-electricity-generation-fuel-type-2018-19-and-2019.
70 Ibid.
71 Australian Government, Productivity Commission, Industry Commission, Report on Energy Generation and Distribution (Commonwealth of Australia, 1991), available at: https://www.pc.gov.au/inquiries/completed/energy-generation#::text=The%20Industry%20Commission%20inquiry%20report%2C%20Energy%20Generation%20and,the%20findings%20of%20the%20Industry%20Commission%27s%20public%20inquiry; F. Hilmer (Chairman), National Competition Policy Review (Commonwealth of Australia, 1993), available at: http://ncp.ncc.gov.au/docs/National%20Competition%20Policy%20Review%20report,%20The%20Hilmer%20Report,%20August%201993.pdf.
72 See Parliament of Australia, Heads of Government, ‘Communiqué’, 11 May 1992, available at: https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2FHPR02012046%22.
73 For more detail, see C. Saunders, ‘Australian Economic Union’, in C. Saunders & A. Mullins, Economic Union in Federal Systems (Federation Press, 1994) pp. 1–25, at 2–4.
74 See, e.g., C. Saunders, The Constitution of Australia: A Contextual Analysis (Hart, 2011), p. 250.
75 Special Premiers’ Conference, ‘Communiqué’, 30–31 July 1991, available at: https://parlinfo.aph.gov.au/parlInfo/download/media/pressrel/6371645/upload_binary/6371645.pdf.
76 Lyster & Bradbrook, n. 37 above, pp. 128–9.
77 Special Premiers’ Conference, n. 75 above.
78 Especially in Victoria, but also in New South Wales and South Australia, the former integrated state utilities were disaggregated and corporatized during the first half of the 1990s. For detailed accounts of the degrees of restructuring see M. Roarty, ‘Electricity Industry Restructuring: The State of Play’, Research Paper No. 14, Parliamentary Library, Parliament of Australia, 25 May 1998, available at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/RP9798/98rp14; A. Rann, ‘Electricity Industry Restructuring: A Chronology’, Background Paper 21, Parliamentary Library, Parliament of Australia, 30 June 1998, available at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/Background_Papers/bp9798/98bp21.
79 See Council of the Australian Governments, ‘Communiqués’, 8–9 June 1993, 25 Feb. 1993, 19 Aug. 1994.
80 Electricity (National Scheme) Act 1997 (ACT), s. 5; Electricity – National Scheme (Tasmania) Act 1999 (TAS), s. 6; Electricity – National Scheme (Queensland) Act 1997 (Qld), s. 6; National Electricity (Victoria) Act 2005 (Vic), s. 6; National Electricity (New South Wales) Act 1997 (NSW), s. 6.
81 Now renamed Competition and Consumer Act 2010 (Cth).
82 Initially named the National Electricity Market Ministers Forum, and later the Ministerial Council on Energy.
83 Council of Australian Governments, Towards a Truly National and Efficient Energy Market (Commonwealth of Australia, 2002) (Parer Review).
84 Ibid., p. 9.
85 Ibid., p. 80.
86 Australian Electricity Market Agreement, 30 June 2004 (as amended Dec. 2013).
87 National Electricity (South Australia) (New National Electricity Law) Amendment Act 2004 (SA); Australian Energy Market Commission Establishment Act 2004 (SA); Trade Practices Amendment (Australian Electricity Market) Act 2004 (Cth).
88 National Electricity Law, s. 29; and Australian Energy Market Commission Establishment Act 2004 (SA).
89 See National Electricity (South Australia) (National Electricity Law–Australian Energy Market Operator) Amendment Act 2009 (SA); National Electricity Law, s. 49(2).
90 Australian Electricity Market Agreement, n. 86 above, s. 4.
91 Ibid.
92 For further information, see Australian Government, Department of Prime Minister and Cabinet, ‘Effective Commonwealth-State Relations’, available at: https://www.pmc.gov.au/domestic-policy/effective-commonwealth-state-relations.
93 National Electricity Law, s. 2.
94 Kallies, n. 45 above, p. 1563.
95 National Electricity Law, s. 7.
96 Examples and further sources can be found in Kallies, n. 45 above, p. 1578.
97 Ibid.
98 See, e.g., Kallies, n. 45 above; L. Godden & A. Kallies, ‘Electricity Network Development: New Challenges for Australia’, in M. Roggenkamp et al. (eds), Energy Networks and the Law (Oxford University Press, 2012), pp. 292–312.
99 Electricity Act 1996 (SA), s. 15; Electricity Act 1994 (Qld), Ch. 2; Electricity Industry Act 2000 (Vic), Div. 3; Electricity Supply Industry Act 1995 (Tas), Pt 3; in NSW and ACT only electricity distribution companies and retailers require a licence; see Utilities Act 2000 (ACT), Pt 3; and Electricity Supply Act (NSW), s. 14.
100 The Victorian and South Australian electricity sectors are fully privatized; other states have partly privatized their electricity industries.
101 Australian Energy Market Operator, ‘Draft 2020 Integrated System Plan’, 12 Dec. 2019, p. 10, available at: https://www.aemo.com.au/-/media/Files/Electricity/NEM/Planning_and_Forecasting/ISP/2019/Draft-2020-Integrated-System-Plan.pdf.
102 Ibid., Executive Summary.
103 Ibid., p. 6.
104 See in more detail below Section 5.3.
105 M. Vertigan, G. Yarrow & E. Morton, ‘Review of the Governance Arrangements for Australian Energy Markets – Final Report’, CoAG Energy Council, 23 Oct. 2015, available at: http://www.coagenergycouncil.gov.au/publications/review-governance-arrangements-australian-energy-markets-final-report.
106 Reforming our Constitution, n. 58 above, Ch. 4, p. 37, para. 4.16.
107 For more detail, see Kallies, n. 45 above, p. 1580.
108 Osofsky & Wiseman, n. 17 above.
109 For the early, ‘no regrets’ approach, see below; more recently, A. Taylor (Minister for Energy and Emissions Reduction), ‘National Press Club Address – “Energising the Economy: The Case for a Technology-led Approach”’, 22 Sept. 2020, available at: https://www.minister.industry.gov.au/ministers/taylor/speeches/national-press-club-address-energising-economy-case-technology-led.
110 Kyoto Protocol to the UNFCCC, Kyoto (Japan), 11 Dec. 1997, in force 16 Feb. 2005, Art. 5(2), available at: http://unfccc.int/resource/docs/convkp/kpeng.pdf.
111 Australia signed the instrument of ratification in Dec. 2007, the ratification came into effect in Mar. 2008: UNFCCC, ‘The Kyoto Protocol: Status of Ratification’, available at: http://unfccc.int/kyoto_protocol/status_of_ratification/items/2613.php.
112 J. Howard (Prime Minister of Australia), ‘Safeguarding the Future: Australia's Response to Climate Change’, Statement at Parliament House, 20 Nov. 1997.
113 ‘No regrets’ measures are defined as ‘a measure that has other net benefits (or, at least no net costs) besides limiting greenhouse gas emissions’: Australian Greenhouse Office, Greenhouse Challenge: Evaluation Report (Australian Greenhouse Office, 1999), p. 12.
114 For a detailed account of the range of programmes contained in Howard's policy package, see Lyster & Bradbrook, n. 37 above, pp. 85–7.
115 N. 42 above.
116 Australian Government, Department of Foreign Affairs and Trade, ‘Australia's Intended Nationally Determined Contribution to a New Climate Change Agreement’, Submission to the United Nations Framework Convention on Climate Change, Aug. 2015, available at: https://unfccc.int/files/focus/indc_portal/application/pdf/presentation_to_unfccc_indc_bonn_-_final_for_secretariat.pdf.
117 See Climate Action Tracker, ‘Australia’, 2020, available at: https://climateactiontracker.org/countries/australia.
118 Electricity Supply Act 1995 (NSW); Electricity Supply (General) Regulation 2001 (NSW).
119 For an overview, see S. Carley, ‘State Renewable Energy Electricity Policies: An Empirical Evaluation of Effectiveness’ (2009) 37(8) Energy Policy, pp. 3071–81.
120 Renewable Energy (Electricity) Act 2000 (Cth), s. 3.
121 New South Wales Greenhouse Gas Abatement Scheme (GGAS) (Electricity Supply Act 1995 (NSW)); Victorian Renewable Energy Target (VRET) (Victorian Renewable Energy Act 2006 (Vic)); Australian Capital Territory Greenhouse Gas Reduction Scheme (Electricity (Greenhouse Gas Emissions) Act 2004 (ACT)); Queensland 13% Gas Scheme (Electricity Act 1994 (Qld)).
122 Victorian Renewable Energy Target, as contained in the Victorian Renewable Energy Act 2006 (Vic).
123 Electricity Supply Act 1995 (NSW) Pt 8A, and Electricity Supply (General) Regulation 2001 (NSW) as amended by Electricity Supply Amendment (Greenhouse Gas Emissions Reduction) Act 2003 (NSW).
124 Unlike a cap and trade scheme (such as the European Emissions Trading Scheme, or the Carbon Pricing Scheme) a baseline and credit scheme sets a baseline of expected emissions, and requires the surrender of abatement certificates for any emissions above this baseline. Below baseline emissions can generate tradeable abatement certificates. Details of the design of the NSW scheme can be found in Independent Pricing and Regulatory Tribunal New South Wales (IPART), NSW Greenhouse Gas Reduction Scheme: Strengths, Weaknesses and Lessons Learned (IPART, 2013).
125 Including, e.g., ‘the building of new low-emissions-intensive generation plant, the greater use of existing low-emissions power plant, and efficiency improvements to existing power stations; the building of smaller generation and cogeneration plant fuelled by waste methane from landfill, sewerage and putrescible waste; the capture and combustion of waste coal mine gas; improvements in fuel efficiency and production processes at large industrial sites; tree planting and maintenance projects on farming land’: ibid., p. 5.
126 See also Prest, J., ‘Australian Renewable Energy Law: Carbon Lock-in or Clean Energy Transition?’ (2018) 9(1) Renewable Energy Law and Policy Journal, pp. 44–67Google Scholar.
127 Australian Government, Our Economy, Our Environment, Our Future (2007).
128 Ibid., pp. 13–4.
129 Ibid., p. 7.
130 Australian Government, Securing a Clean Energy Future: The Australian Government's Climate Change Plan (Commonwealth of Australia, 2011).
131 Carbon Pollution Reduction Scheme Bill 2009 (Cth).
132 Commonwealth, Parliamentary Debates, Senate, 30 Nov. 2009, 9602-3. The Prime Minister subsequently decided to delay the scheme; see Prime Minister Kevin Rudd, ‘Press Conference: Prime Minister's Courtyard’, 4 May 2010.
133 Clean Energy Act 2011 (Cth).
134 Clean Energy Finance Corporation Act 2012 (Cth).
135 Australian Renewable Energy Agency Act 2011 (Cth).
136 Climate Change Authority Act 2011 (Cth).
137 See Mormann, n. 22 above.
138 Victorian Renewable Energy Amendment Act 2009 (Vic).
139 Australian Renewable Energy Agency (Repeal) Bill 2014 (Cth).
140 Clean Energy Finance Corporation (Abolition) Bill 2014 (Cth).
141 Climate Change Authority (Abolition) Bill 2013 (Cth).
142 See also Prest, n. 126 above.
143 Clean Energy Regulator, ‘Carbon Pricing Mechanism’ (2015).
144 Ibid.
145 See Carbon Farming Initiative Amendment Act 2014 (Cth).
146 Climate Action Tracker, n. 117 above.
147 Renewable Energy Target Scheme Expert Panel, ‘Report of the Expert Panel’, 15 Aug. 2014, available at: https://apo.org.au/node/41058.
148 G. Hunt (Minister for the Environment) & I. MacFarlane (Minister for Industry), ‘Review of the Renewable Energy Target, Joint Media Release, 17 Feb. 2014, available at: https://www.minister.industry.gov.au/ministers/macfarlane/media-releases/review-renewable-energy-target.
149 For further detail see Prest, J. & Soutter, G., ‘The Future of Australia's Federal Renewable Energy Law’ (2018) 92(10) Australian Law Journal, pp. 799–813, at 803Google Scholar.
150 Prest, n. 126 above.
151 IEA, Energy Policies of IEA Countries: Australia 2018 Review (IEA, 2018), p. 30. The ACT has recently committed to achieving zero emissions by 2045: Climate Change and Greenhouse Gas Reduction (Interim Targets) Determination 2018 (ACT), Cl. 3.
152 See also Stock, P. et al. , Renewables Ready: States Leading the Charge (Climate Council of Australia, 2017)Google Scholar.
153 Climate Change and Greenhouse Gas Reduction Act 2010 (ACT), s. 9.
154 Electricity Feed-In (Large-Scale Renewable Energy Generation) Act 2011 (ACT).
155 Queensland Government, Department of Resources, ‘Powering Queensland’, updated 1 Apr. 2020, available at: https://www.dnrme.qld.gov.au/energy/initiatives/powering-queensland.
156 Climate Change and Greenhouse Emissions Reduction Act 2007 (SA), s. 5. Note that the 20% target in legislation has been raised by ministerial determination under this section.
157 Weisbrot, E. et al. , State of Play: Renewable Energy Leaders and Losers (Climate Council of Australia, 2019), p. 18CrossRefGoogle Scholar.
158 Pastoral Land Management and Conservation Act 1989 (SA), ss 4, 49A ff.
159 Australian Energy Market Operator, ‘South Australia Electricity Report’, Nov. 2019, p. 30.
160 Renewable Energy (Jobs and Investment) Act 2017 (Vic), s 7; Renewable Energy (Jobs and Investment) Amendment Bill 2019.
161 P. Stock et al., n. 152 above, p. 10.
162 W. Hodgman (Premier of Tasmania) & G. Barnett (Minister for Energy), ‘Tasmania Powers National Renewable Energy Achievement’, Press Release, 4 Sept. 2019, available at: http://www.premier.tas.gov.au/releases/tasmania_powers_national_renewable_energy_achievement.
163 See Hazelwood Mine Fire Inquiry, 2014, available at: http://report.hazelwoodinquiry.vic.gov.au/introduction.html.
164 Finkel Review, n. 11 above.
165 Buckman, G., Sibley, J. & Bourne, R., ‘The Large-scale Solar Feed-in Tariff Reverse Auction in the Australian Capital Territory, Australia’ (2014) 72(C) Energy Policy, pp. 14–22CrossRefGoogle Scholar.
166 For more detail of the respective schemes, see Victorian State Government, Department of Environment, Land, Water and Planning, ‘Victorian Renewable Energy Auction Scheme’, updated 13 July 2020, available at: https://www.energy.vic.gov.au/renewable-energy/victorian-renewable-energy-auction-scheme.
167 Dec. 2020.
168 Please note that the New South Wales parliament has recently passed a new Electricity Infrastructure Investment Bill 2020, which seeks to support renewable-friendly network infrastructure development with a range of measures; details available at: https://www.parliament.nsw.gov.au/bills/Pages/bill-details.aspx?pk=3818.
169 Simshauser, P. & Tiernan, A., ‘Climate Change Policy Discontinuity and its Effects on Australia's National Electricity Market’ (2018) 78(1) Australian Journal of Public Administration, pp. 17–36CrossRefGoogle Scholar.
170 See, e.g., the aptly named Renewable Energy (Jobs and Investment) Act 2017 (Vic).
171 See May, n. 30 above.
172 Kildea, P. & Lynch, A., ‘Entrenching Cooperative Federalism: Is It Time to Formalise COAG's Place in the Australian Federation?’ (2011) 39(1) Federal Law Review, pp. 103–29, at 114CrossRefGoogle Scholar.
173 Harrison, K., ‘Federalism and Climate Policy Innovation: A Critical Reassessment’ (2013) 39(Supp. 2) Canadian Public Policy, pp. S95–S108CrossRefGoogle Scholar.
174 See further Kallies, n. 45 above.
175 See also Australian Energy Market Operator, ‘Renewable Integration Study’, available at: https://aemo.com.au/en/energy-systems/major-publications/renewable-integration-study-ris.
176 See further Energy Security Board, ‘The National Energy Guarantee: Advice’, 20 Nov. 2017, available at: http://www.coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/Report%20on%20the%20National%20Energy%20Guarantee.pdf.
177 Ibid., pp. 4–5.
178 Ibid., p. 35.
179 M. Grattan, ‘Prime Minister Malcolm Turnbull Shelves Emissions Reduction Target as Leadership Speculation Mounts’, The Conversation, 20 Aug. 2018, available at: https://theconversation.com/malcolm-turnbull-shelves-emissions-reduction-target-as-leadership-speculation-mounts-101811.
180 See, e.g., Prest, n. 126 above, p. 66.
181 For detail, see CoAG Energy Council, ‘Retailer Reliability Obligation’, Bulletin, July 2019, available at: http://www.coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/RRO%20Bulletin%20-%2020190701.pdf.
182 Osofsky & Wiseman, n. 17 above, pp. 841–2.
183 See also Simshauser & Tiernan, n. 169 above.
184 See also Rossi, n. 18 above, p. 401.
185 See, e.g., Marsden, S., ‘The “Triangle” of Australian Energy Law and Policy: Omissions, Connections and Evaluating Environmental Effects’ (2017) 29(3) Journal of Environmental Law, pp. 475–503Google Scholar.
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