West Australia considers carbon penalty for high emission generators

Out-Law News | 17 Aug 2022 | 1:48 am | 1 min. read

The state government of West Australia (WA) is considering a carbon penalty for high emission power generators connected to the state grid.

The penalty would be applied to newly built and legacy generators in the Southwest Interconnected System, which covers areas including Perth and the surrounding area, according to a local report. Revenue collected from the penalty could be used to incentivise early entry of grid firming technologies to make sure ”reliable power continues as the sector moves towards net zero emissions by 2050”.

Varma George

George Varma

Partner

This mechanism is needed to drive energy transition and decarbonisation. We have seen similar schemes adopted in other jurisdictions and this has certainly assisted with encouraging heavy carbon emitters to be more innovative and motivated to seek out ways to reduce their carbon foot prints.

The policy was first proposed in a discussion paper on WA’s wholesale electricity market (154-page / 5.5MB PDF), published by the state’s economic regulator. The regulator is concerned that renewable energy will not earn enough profits under the existing market structure while thermal generators are withdrawn.

The carbon penalty proposal is expected to be reviewed this week, according to the report.

George Varma of Pinsent Masons said: “The penalties to be applied will need careful consideration so that they are robust enough to drive the right actions and not tokenistic. There are opportunities for Australia to capitalise on its natural resources and become a leading green energy producer and exporter. Imposing carbon penalties will expedite this pivot and play a role in driving Australia’s decarbonisation movement.”

In June, the WA government published a plan to shut state-owned coal power stations by 2030, with A$3.8 billion to spend on renewables. However, gas-fired units operated by private power stations and other gas units might also be impacted by the proposed penalty.