The federal government’s energy security adviser has suggested renewable energy generators be offered incentives to build projects in particular zones across Australia, in a bid to drive investor confidence and deliver long-term benefits to consumers.

As the ESB and its chair, Kerry Schott, called for urgent reform to the national electricity market, which was “no longer fit for purpose”, the board said a new system was required to co-ordinate growing renewable energy transmission, generation and storage.

With costly delays in connecting renewable energy projects to the grid and lenders concerned about receiving a return on investments, renewable energy zones have been proposed so there is no longer open access to the network.

Generators would participate in an auction or tender process to compete for the right to connect to a REZ and in return receive cheaper connections and increased certainty about a project’s approval.

The ESB suggested four ways of giving the winning generators’ confidence that another player would not build a project in the zone that limited their renewable energy output, including that new entrants could not connect to the REZ until they showed their presence would not impede others.

Projects within a zone would also get priority to dispatch energy over those outside it.

Tony Wood, the Grattan Institute’s energy program director, agreed there should be some government involvement in planning renewable energy zones but cautioned against being too interventionist in deciding who would be able to set up shop. “Once you’ve built this thing (a REZ), let them go and build it,” he said.

“You don’t have someone deciding that once Woolworths has built a supermarket, you can’t build an Aldi in the same region.

“I completely agree some planning is necessary because we don’t want a free for all but the government’s role should be to say to the private sector, ‘You go and build the necessary investment and you decide where you want to build it and don’t come back complaining to us if you can’t get a return on your investment’. We want people who can understand the technology, finances and market risks to be able to invest themselves.”

The ESB’s consultation paper on renewable energy zones, produced for Energy Minister Angus Taylor and his state counterparts, said while current access arrangements to the grid might have been adequate with only incremental investment occurring, they were not fit for the flood of renewable energy to come.

“Orderly renewables development will help to reduce risk associated with network congestion, low marginal loss factors and technical difficulties,” the paper says.

“Orderly development and reduced connection uncertainties would be of benefit to investors and, in the long run, to customers.”

Mr Taylor seized on two ESB reports, also released on Tuesday, that looked at the health of the NEM and its design post-2025, saying Australia needed balance between record levels of investments in renewable energy alongside dispatchable generation.

After the report on the health of the NEM warned that security remained the most concerning issue, opposition energy spokesman Mark Butler said: “Scott Morrison cannot land a plan to keep Australia’s lights on.”

Source: The Australian