After widespread power blackouts last summer, the long-awaited Finkel review of the electricity market has put energy security and stability centre stage, with a raft of technical recommendations put to the Council of Australian Governments meeting on Friday. But tackling the more complex issue of how to move beyond the existing renewable energy target remains on the backburner.

A key recommendation is for an Energy Security Board to be established, reflecting the need to ensure widespread blackouts are avoided with the shift to renewable energy as coal-fired power stations are shut down.

But the recommendation has triggered immediate concerns that "going easy" on pushing power generators to cut emissions will place greater pressure on other parts of industry, and the transport sector, to make tougher cuts to their emissions.

In particular, failing to endorse a move beyond the existing target of reducing emissions, by 28 per cent on 2005 levels by 2030, misses an important opportunity. To do so, Chief Scientist Dr Alan Finkel argued, "may have consequences for security, cost and reliability".

Rather, the review sidestepped the issue by stating it "encourages the Australian government to develop a national 2050 emissions reduction strategy by 2020, consistent with commitments under the Paris Agreement".

"This will set expectations and help to guide investment decisions in the electricity sector by providing an anchor point for Australia's long-term emissions trajectory."

As a result, by pushing for a so-called "clean energy target"  rather than a more rigorous means of cutting emissions such as with an energy intensity scheme, the recommendation won the immediate backing of the energy utilities.

"While we have advocated for an emissions intensity scheme (EIS), ... a clean energy target is a viable policy option and will unleash the necessary new investment in the national electricity market," AGL said, pointing out the review had found the resource costs of such a scheme were relatively similar to both business-as-usual and an EIS.

The clean energy target would be "technologically neutral", the report noted, while also helping to lower long-term emissions. "For example, a mix of wind, solar and coal generation would be equally acceptable as a mix of wind, solar and gas generation as long as the emissions reduction trajectory is achieved."

Both a clean energy target and an emissions intensity scheme "are credible emissions reduction mechanisms because they minimise costs for consumers, are flexible and adaptable, and satisfy security and reliability criteria", the review found. "Both mechanisms ... deliver better price outcomes than business as usual."

However a clean energy target "could build directly on the experience of the renewable energy target" and avoid the need for new trading rules and further complexity and hence be implemented comparatively painlessly.

Energy Action's director of innovation and sustainability, Paul Bannister, said the decision to opt for a clean energy target was "pragmatic" since it may more easily win political support, rather than an energy intensity scheme.

"But this is always open to meddling," he said, warning of the potential for political intervention in the future.

Similarly, while the review has backed the emergence of so-called "micro-grids" any change could be some time off since a review of the relevant regulations will not begin for a year.

"The development of a functioning smart grid where energy users can sell demand reductions and surplus on-site generation in a free-market environment is central to the necessary reforms," Energy Action's Mr Bannister said. "This is essential to ensure a least-cost outcome for energy users and the economy as a whole."

The chief executive of Origin Energy, Frank Calabria, said he hoped the Finkel review "will pave the way for a more co-ordinated national approach to energy and climate policy".

"The important work now begins as industry and governments work together to translate recommendations into actions. 

"Getting Australia's energy and climate change policy settings right is crucial to attracting the investment required to maintain a secure and affordable supply of energy to Australian homes and businesses, as we continue the transition to a low-carbon economy."

The release of the Finkel review into the electricity system comes as electricity consumers are bracing for another round of "sticker shock" from surging electricity bills.  Prices in the ACT are rising around 20 per cent, while AGL announced on Friday it would raise charges in NSW by 16 per cent from July 1 and by 18 per cent in South Australia for all households on so-called standing offers, as the surge in wholesale prices flows through to consumers.

Yet while the Finkel review was touted as providing a road map to lower electricity prices, the report failed to indicate how this will be achieved, since it has made it clear substantial new investment will be needed in the long-distance transmission  network, for example, with the cost burden to be borne by all consumers.

Central to the report is boosting the role of renewables and it backs new renewable energy projects having backup systems to help improve their reliability and smooth some of the "intermittency" that has plagued the electricity market.

"It's about time," one energy trader said. "Intermittency is the key issue with renewables. It is not unusual these days to see wind providing 40 per cent of all output. But it is not there at peak demand times, when it is needed.

"This has placed an additional cost on consumers and the other generators. So really, it is 'about time' additional renewables had some sort of back up."

Craig Memery of the Public Interest Advocacy Centre warned this will force consumers to pay "more than they should in the long run".

''Requiring new renewable energy operators to invest in energy storage technologies or come up with other ways of addressing their variable output is expensive and unnecessary," he said. "Placing additional obligations on renewable energy generators runs the risk of using less cost-efficient approaches, which translates to higher costs for consumers."

But higher charges are unavoidable with the need to build more transmission lines to accommodate more renewable energy plants.

"There is a lot of infrastructure spending coming," warned Gavin Dufty, policy officer with the St Vincent de Paul Society. "That raises the issue of who pays for it and how it is allocated – and that's quite regressive", referring to the fact that the cost will more likely fall heaviest on households and businesses who can't afford to install solar systems, and the like.

"If you go on a big infrastructure spend, households and small businesses will pay – but you need to allocate that cost in line with people's ability to pay. System security doesn't come cheap. This transition is costly. It is one of the biggest infrastructure challenges we've got – this is big dollars, and will wash through onto the household bill."

The Finkel review warned that newer renewable power generators "will likely be smaller in scale but more numerous than coal-fired generators, so a more co-ordinated approach to transmission planning is required". As part of this, it wants "a long-term, integrated grid plan ... to establish an optimal transmission network design to enable the connection of new renewable energy resources".

"Co-ordination of generation and transmission investment so that networks connect the areas with the best renewable energy resources, at an efficient scale, will be a critical challenge. Transmission businesses need to be incentivised to build the network infrastructure required for the future of the [national energy market], but not to build unnecessarily."

As BusinessDay reported when the federal government first unveiled its plan to boost capacity of the Snowy Hydro scheme in early March, the headline cost of $1.5 billion-$2 billion would double once the need for upgraded transmission links was taken into account, which was confirmed earlier this month in Senate estimates hearings.

And it has gone unnoticed that on the back of the plan by the Victorian government to lift to 40 per cent the supply of electricity sourced from renewable energy within the next decade, plans are already afoot for as much as 5000 megawatts of new renewable projects in western Victoria alone, of which Australian Energy Markets Operator reckons 3000 megawatts will probably be built. But if the AEMO forecast proves to be conservative and the full 5000 MW is built, that would be more than enough to replace three times the capacity of the recently shuttered Hazelwood power station (1600 megawatts), and more than Loy Yang A (2200Mw) and Loy Yang B (1600Mw) combined.

According to AEMO, this will need heavy spending on the transmission network throughout that part of the state to get the power to market, with private estimates that the cost could run to several billion dollars. And unless the network companies are paid to build those links, that renewable energy won't find a home.

"Without network investments to improve [network] strength, the 3000 megawatts of new renewable generation may still be constrained or disconnected," AEMO warned in a recent report, "even after investments to improve network thermal capacity have been carried out."

"Adding 4000 or 5000 megawatts would need a major transmission upgrade of $3 billion-$4 billion," one senior power industry figure said. "There appears to be a 'cargo-cult' mentality taking hold – build it [the network] and they will come. By going about this process the way it has, via a  so-called 'regulatory investment test for transmission' this will push up consumers' bills, since they will have to foot the cost of the expansion and the ongoing cost of operating it.

"There is an existing approach under the electricity market rules which allows for 'scale efficient' network expansion. Under this approach, the builder of the additional generation capacity pays for the network upgrade, which is only fair since it will profit from the move.

"By adopting the approach put out there by AEMO for this network upgrade, this will add to the bills of all electricity users. These upgrades should only proceed if paid for by the generator."