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MELBOURNE, June 9 (Reuters) - Australia needs a clean energy target to cut carbon emissions, cap soaring power prices and keep the lights on, the nation's chief scientist said in a report on Friday, aiming to end a decade of political warfare over climate policy.
The highly anticipated blueprint, presented to federal and state leaders, is expected to drive a compromise on carbon and energy policy, urgently needed to curb power price volatility and end outages that have hurt manufacturers.
The energy security review was commissioned last October after tornadoes slammed transmission lines in South Australia, triggering a state-wide blackout that left homes in the dark for up to eight hours and crippled industry for nearly two weeks.
"The lack of a transparent, credible and enduring emissions reduction mechanism for the electricity sector is now the key threat to system reliability," the review said.
The energy crisis has crept up on Australia, despite its rich endowment of coal and gas, as states have promoted rooftop solar and wind power in the absence of stable carbon policy at a federal level over the past 10 years.
"More of the same is not an option, we need to aim higher," Chief Scientist Alan Finkel, the head of the review panel, said in a statement.
Finkel called for the government to set a clean energy target, designed to encourage investment in "reliable generation", including coal with carbon capture and storage or gas.
It would also require all new generators to have "fast response" capabilities to deal with frequency fluctuations, which means variable sources like wind and solar farms would need to be teamed with sources like gas-fired power or energy storage.
The report said large generators should have to give three years' notice before closing to avoid shocks to the market.
"If we adopt a strategic approach, we will have fewer local and regional problems, and can ensure that consumers pay the lowest possible prices over the long term," Finkel said.
To help cut bills, consumers should be rewarded for cutting power use and for generating power from sources like rooftop solar, the report said.
Defying state bans on gas drilling and green groups' calls for no new gas-fired power, Finkel said gas is essential for providing reliable electricity, and governments should work with communities to encourage safe exploration and production of gas.
"For the short to medium-term the NEM (national electricity market) is likely to require higher levels of flexible, gas-fired generation to support (wind and solar)," the report said.
Urgent action is needed not just to stabilise the grid, but also to cut carbon emissions.
Based on the current energy mix and expected growth, Australia's emissions in 2030 are projected to be about 57 percent higher than its target of 290 million tonnes under the Paris climate accord, according to the nation's top research body.
Reporting by Sonali Paul; Editing by Joseph Radford