Australia’s Energy Ministers have agreed on important steps forward for the domestic energy system.

The decision to include emissions reductions in the NEO is important in helping ensure Australia’s electricity system is ‘fit for purpose’ to meet the climate crisis.

An electricity system that makes near zero emissions — and can supply more power — by 2035 underpins decarbonisation across the economy, Climateworks analysis shows.

A rapid transition to near zero emissions electricity is the most cost-effective way for Australia’s economy to reach net zero. An increased supply of clean energy will be crucial for businesses to make the most of the global shift to a net zero economy.

The Energy Ministers have shown they understand that they and energy market agencies have to think about the energy system in an integrated way, to design a market fit for a fully decarbonised economy.

They will have to consider supply and demand, the shift from a centralised system, and changes in electricity, gas and the emerging hydrogen market.

Many of these changes have started already. But our energy system needs to be ready for rapidly increasing electrification in vehicles, homes and industries as well as the decentralisation of energy production and storage.

Our work shows improving the energy performance of buildings — and electrifying homes and commercial premises — are some of the cheapest emissions reductions available. This will improve health and reduce our bills.

In transport the key will be ensuring the electricity market can scale up to allow the shift to EVs and hydrogen.

In industry, the shift will be towards more green energy, changing the scale and geography of the grid. Green hydrogen will be a new energy source but will also increase demand on electricity for production.

It’s a good sign that Ministers will collaborate on a National Energy Transformation Partnership.

Insights from Climateworks’ work show that this integration in energy thinking – and place-based planning, particularly for industry needs – is a core part of is needed for Australia to transition its economy.

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