Call to scrap the Safeguard Mechanism


Hey Reader, in today's edition:

  • Call for a new way to tax carbon
  • A 'landmark quarter for the NEM'
  • Coal closure expectations

Make polluters pay: Superpower Institute

The Superpower Institute is calling for a two-pronged economy-wide carbon levy, in an audacious pitch that involves scrapping the government’s existing emissions policies including the Safeguard Mechanism.

In the think tank’s blueprint, the Institute, led by Rod Sims and Ross Garnaut, argues that the Safeguard Mechanism should be scrapped because, as a baseline-and-credit emissions trading scheme, it generates zero government revenue.

A Polluter Pays Levy (PPL) would tax carbon pollution at source, including oil, gas and coal extraction sites and on companies that import the resources, generating an average $35.6 billion over the next 35 years.

Meanwhile, a Fair Share Levy (FSL), presented as a 40% cashflow tax, is modelled on a model used in Norway’s gas industry, designed to capture the economic rents that producers make on super profits and redirect them back into other parts of the economy. It would replace the existing Petroleum Resource Rent Tax

Part of the proceeds from the levies would compensate households and small businesses for the inevitable higher prices stemming from taxing the upstream resources, with payments to households and small businesses averaging $490 a year, totalling $4.1 billion.

Wholesale prices down as NEM and WEM break records

A stable start to summer saw wholesale electricity prices tumble across the NEM in the December quarter, in a period marked by new demand highs tempered by rooftop solar.

AEMO’s latest Quarterly Energy Dynamics confirmed the now well quoted news that renewables tipped the scales in the quarterly energy mix for the first time, delivering 51% of overall supply, up from 46% in Q4 2024.

AEMO Executive General Manager Policy and Corporate Affairs, Violette Mouchaileh, labelled it a “landmark moment for the NEM”.

“It reflects years of sustained investment and demonstrates that more wind, solar and battery capacity in the system reduces reliance on higher cost coal and gas generation, placing sustained downward pressure on wholesale electricity prices,” Mouchaileh said.

WA also recorded new records, with an average renewable contribution of 52.4% for the quarter and a new peak renewable contribution of 91.1% on December 20.

Grid-scale wind and solar output broke records in the NEM — increasing by 29% and 15% respectively — and battery discharge nearly tripled to average 268MW during the quarter.

The growth in output was significant enough to reduce minimum operational demand to record lows in Victoria (1287MW), South Australia (-263MW) and Tasmania (678MW) as well as across the entire NEM.

Growth in distributed rooftop solar output, in particular, reached all-time highs during the last quarter, growing 8.7% quarter-on-quarter to produce 4407MW – enough to offset a 2.2% increase in overall NEM demand and limit growth in overall operational demand to just 0.9%.

At the same time, the QED reports, coal-fired generation declined 4.6% from the previous quarter to set a record low of 11,544MW.

The other side of this coin: average curtailment of grid-scale solar reached an all-time high, up 21% compared to 2024, led by NSW

System security remains a challenge, with the quarter requiring directions to market participants to maintain system strength as the number of synchronous generators online at times dipped below required levels in New South Wales and Victoria. Directions were also issued to manage minimum system load conditions in South Australia on multiple low demand days in November and December.

Gas demand and production declined, with prices also dipping on the back of lower demand for Queensland LNG exports and colder weather conditions.

Catch Up

Capital

Three-quarters of Australia’s coal-fired power capacity will have been retired by 2035, BloombergNEF (BNEF) has noted in a warning that operators have less than a decade to bolster alternative baseline power supply. Despite recent state moves to extend the lifespan of key coal-fired generators, a major decline in 2029 will slash coal-fired generation to around 15GW, with generation declining to around 6GW in 2035 and just 1GW by 2040 amid what Australian senior associate Sahaj Sood called growing “fears… that not enough replacement capacity will be installed in time.”

Woodside Energy (ASX: WDS) beaten 2025 production guidance despite lower demand from Australia’s east coast market and a 4% quarterly decline in fourth-quarter production, the company revealed in quarterly results. It flagged a slide in production for the year ahead, partly due to a five-week maintenance shutdown of the Pluto LNG venture. (AFR)

Decarbonisation has become a critical part of data centre growth strategy, venture capital analyst firm PitchBook has advised in a report that found investment in AI-linked climate technology surged 59% from 2024 to 2025, when it reached a record $9.4 billion ($US6.6 billion) from 304 deals. Energy systems and energy asset monitoring are seeing “particularly strong AI adoption,” Pitchbook notes, with AI increasingly used to process time-series data from grid infrastructure, energy-consumption devices, distributed energy resources and storage systems. (PitchBook, download with free registration)


Projects

QPM Energy Limited’s 112MW Isaac Power Station has marked a major milestone, executing a Connection Project Delivery Agreement with Powerlink Queensland that allows Powerlink to begin construction at its Moranbah substation — crucial in linking the power station to Queensland’s electricity network. The agreement gives QPM a 30-year connection term, with a target of energising the power station by mid 2027.

Southerly Ten CEO Charles Rattray has welcomed the news that Victoria has rescheduled its first offshore wind auction to August. “Extensive site studies confirm that Star of the South is feasible and ready to deliver benefits to Gippsland, Victoria and Australia,” he said. The auction will provide a mechanism for development of an initial 2GW of capacity.


Regulation

The Essential Services Commission has cancelled the accreditation of energy efficiency consultant Save Energy Solutions after it was found to have submitted doctored photos of heat pump water heater installations, allowing it to fraudulently claim certificates under the Victorian Energy Upgrades (VEU) program. As well as being declared “no longer… fit and proper or competent and capable to be accredited,” the ESC refused to register 1,920 Victorian energy efficiency certificates worth $154,080. The cancellation follows similar recent action against Vision Environmental Solutions, Green Energy Trading, and MYOM Australia.


Technology

ST Telemedia Global Data Centres (STT GDC) will trial High Voltage Direct Current (HVDC) technology in its FutureGrid Accelerator, an AI infrastructure testbed located at the Nanyang Technological University, Singapore. The facility is the region’s first live testbed demonstrating the use of real AI workloads running on HVDC – an alternative to conventional AC-based electrical systems that reduces energy consumption by up to 30%, cuts carbon emissions by up to 400 tonnes of CO2 equivalent per MW per year, and supports ultra high density racks of greater than 1,000kW that are becoming necessary as AI data centre power consumption continues to surge.

Sodium‑ion technologies are already competitive with some lithium‑ion counterparts in select segments of the market. “In applications where size and weight are less critical, such as stationary energy storage, sodium‑ion batteries are already beginning to emerge commercially,” lead author Nazmul Hossain told pv magazine. “Major manufacturers, such as CATL, have announced plans to begin mass production of next‑generation sodium‑ion cells by 2026, with intentions to expand their use into vehicles and storage systems.”


Climate

Soaring temperatures in Victoria drove demand in the state to all-time highs, with its 17-year record of 10,496MW falling as record-beating temperatures nearing 50°C across the state drove demand to 10,784MW just before 7pm local time on 27th January. More than 94,000 customers were reported to be without power across the state. (Watt Clarity)


Research

The United States’ withdrawal from global climate accords will boost temperatures by 0.1°C to 0.2°C but the world’s other countries can limit global warming increases to 1.8°C to 2.2°C by 2100, new Climate Resource modelling has found. Achieving those targets will require other countries to achieve mid-century net-zero goals aligned with stronger 2035 climate targets. By contrast, temperature rises are projected to be 2.5°C to 2.9°C if countries continue with current policies. (Climate Resource)

Around one-fifth of solar panels fail much faster than expected, UNSW researchers have found – with up to 20% of the nearly 11,000 analysed PV cells performing 1.5 times worse than the average and 8% degrading twice as quickly. Solar systems are generally designed for 25-year lifespans but the researchers found that many have useful working lives of just 11 years – losing 45% of their output capacity by the 25-year mark. (UNSW)


People

Climate change and sustainability advisory firm Foresight Consulting Group hired the long-term head of EY’s APAC climate and sustainability practice, Terence Jeyaretnam, as its Executive Director and Chair.

What's On

January 29
The Politics of the Impossible: Will Australia prioritise its economy and make polluters pay?

Professor Rod Sims and Superpower Institute Carbon Pricing and Policy Lead Ingrid Burfurd will speak at this webinar on the economic and political context behind The Superpower Institute’s latest report The Case for Pricing Pollution.


February 8-11
World Renewable Energy Congress

Zenith Energy Executive ESG & Stakeholder Engagement Dominic Da Cruz, Pollination Managing Director Rob Grant, Western Australian Program Director for The Superpower Institute Jessica Shaw and European Renewable Energies Federation Vice-President Rainer Hinrichs-Rahlwes will speak at this Perth event also featuring researchers from around the world.


February 11
AEMO Quarterly Energy Dynamics

AEMO Manager - Market Dynamics Kerry Galloway will speak at this webinar on the outcomes of the last quarter of 2025.


February 11
Delivering on the Queensland Energy Roadmap

CS Energy CEO Brian Gillespie will deliver the keynote at this Queensland Energy Club event in Brisbane.


February 24
Energy Security NSW

AEMC Commissioner & Reliability Panel Chair Rainer Korte will keynote this CEDA event in Sydney also featuring ASL CEO Nevenka Codevelle, Neoen Australia Head of Development Nathan Ling, Transgrid EGM of Network Jason Krstanoski and Australian Gas InfrastructureGroup EGM Customer & Strategy Cathryn McArthur.


February 26
Energy Security Queensland

AEMC Commissioner Rainer Korte will keynote this CEDA event in Brisbane, also featuring Energy Queensland EGM Regulation, Risk and Strategy Benn Barr; Powerlink EGM, Operations Stewart Bell; APA Group Operations Executive Petrea Bradford; and CleanCo Queensland EGM Asset Operations Rimu Nelson.

The Energy

The Energy is dedicated to covering the business of energy and in particular the people, capital, projects and emerging technology behind the energy transition.

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