Australia's energy policies must be driven by competitive markets that operate in the long-term interests of consumers and are guided by "a constructive, non-political debate", according to the federal government's long-awaited energy white paper.
The wide-ranging policy update, aimed at guiding energy markets for years to come, is the first for the sector since 2004 – a delay criticised by the opposition.
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Protesters fire up Ferguson's energy speech
Far-reaching energy white paper launch was going according to plan until uninvited guests interrupted Resources Minister Martin Ferguson
It comes as consumers battle rising electricity costs prompted by excessive investment in networks, particularly by state-owned companies, and the recent introduction of the carbon tax. Power prices rose 15 per cent in the September quarter alone, the Australian Bureau of Statistics reported last month.
Launching the white paper in Melbourne, federal Resources Minister Martin Ferguson said the rapid rise in electricity prices in recent years has prompted a response from consumers that had been "much higher than expected".
The falling demand, driven also by a restructuring of the economy away from manufacturing, meant that the requirement for additional gas-fired peaking power had all but disappeared, he said.
Still, the white paper is sticking to its forecast that demand for energy will continue to rise at about 1.2 per cent per year over the next two decades.
The forecast of growth comes even though electricity demand has fallen by 3.4 per cent from its peak of 197.9 terawatt hours in 2009-10. "Demand is expected to remain steady at its current level during 2012-13 before returning to growth over the remainder of the decade," the report said.
The paper outlines six key challenges, including minimising energy price pressures and the growth in peak demand, retaining Australia's appeal for development of energy resources, and the transition to less carbon-intensive energy sources.
Mr Ferguson said clean energy sources could expand to provide more than 40 per cent of electricity needs by 2035 and potentially as much as 85 per cent by 2050.
Such a change would involve as much as $200 billion in new generation investment between now and 2050, including $100 billion in renewables and as much as $60 billion in gas.
The energy generation forecasts go out to 2050 in the report, and do not include nuclear energy as part of the supply mix.
Mr Ferguson said the community may make a decision on nuclear in the future but for now it is not being considered because it remains too expensive for base-load generation.
"It's not on the horizon at the moment because it is not cost competitive," he said.
Under the generation projections, brown coal production goes from supplying about one quarter of total electricity generated to only a handful of per cent by 2035 and is absent from the mix by 2050.
Production of black coal, the source of 40 per cent of total power now will also almost be eliminated from the mix by mid-century.
Mr Ferguson singled out "informing a constructive non-political debate'' as "the most important" of the challenges facing the industry.
Removing politics from the energy debate will be difficult, however, as the onus on introducing more competition into energy markets falls largely on the states, particularly Queensland and New South Wales.
Both states rely on major fund injections from state-run power assets to bolster their already tight budgets, revenue that may be at risk from greater competition and privatisation.
Mr Ferguson indicated, however, that the federal government may tread lightly when it comes to pressuring the states to spend less on their networks - expenses that are passed on to consumers.
"I recognise the high value that consumers place on a reliable electricity supply, and I do not underestimate the immediate and devastating impacts from loss of supply," he said, citing the recent "dislocation" in New York when superstorm Sandy left many thousands without power for days.
Mr Ferguson faced his own disruption, with two activists taking over his lectern. He moved to one side as the pair called for action to limit global warming for several minutes before being forcibly removed from the stage by a couple of audience members.
There was no security at the event and a single policeman arrived after Mr Ferguson had concluded his talk.
Earlier Opposition Leader Tony Abbott, who himself faced similar protests during an address to the Melbourne Institute last week, said the white paper was "three years too late".
Mr Abbott said he was happy to look at suggestions in the paper but would not support forced deregulation.
I don't believe that it's right and proper for the federal government to try and coerce the states in this way," he said.
"If the government was serious about getting power prices down, it would scrap the carbon tax."
Queensland energy minister Mark McArdle said the paper had been given to media before state energy ministers, which showed that Labor was "not serious about being bipartisan on electricity industry reforms."
Mr McArdle said proposals to deregulate the industry would only help people in major urban centres and would lead to "masssive" price increases in regional and remote parts of the state.
NSW energy minister Chris Hartcher said NSW was already moving towards partial deregulation of its energy market to provide greater competition. But he said it was "remarkable" that the paper did not list the carbon tax as a "key contributor" to rising power prices.Greens leader Christine Milne said the government should be accelerating the development of renewable energy sources.
Australian Industry Group chief executive Innes Willox said the paper contained many sensible initiatives, but renewed the organisation’s longstanding call for a lowering of the fixed carbon price and an earlier transition to full emissions trading.