Australia's National Electricity Market after Twenty Years

Abstract

The Hilmer reforms served electricity consumers well over the first post-reform decade. However, three key issues emerged from the mid-2000s: (i) a significant and largely unnecessary rise in network expenditures; (ii) emissions policy discontinuity; and (iii) a large increase in wholesale prices due to rising fuel prices and the sudden exit of generators. The consequence was a doubling in retail prices. Deficiencies in cost-recovery mechanisms have meant price increases have disproportionately affected low-income households. We propose three key reforms as rectification: (i) integrating emissions reduction and energy policies; (ii) boosting network capacity utilisation; and (iii) improving cost recovery mechanisms.

Impact of the Nature of Energy Management and Responses to Policies Regarding Solar and Wind Pricing: A Qualitative Study of the Australian Electricity Markets

“…These findings corroborate the ideas of Rai and Nelson (2020), who suggested lowering network prices by adopting more dynamic network pricing, especially at the distribution network level, so that the prices reflect the costs of supplying electricity at different times of the day. Such reforms are targeted at maximising network capacity utilisation, thereby lowering prices.…”

Financing costs and barriers to entry in Australia’s electricity market

“…This survey asked respondents to rank the relative importance of eleven barriers to entry (see Appendix B). The choice of these barriers was based on factors cited in the academic and industry literature (amongst others, Rai and Nelson (2019); Rai and Nunn (2020); Simshauser (2019); Wood et al, 2018)). The following three issues were cited as the top three entry barriers in relation to investment in VRE plant, in decreasing order of importance (Figure 2):…”

“…An insufficient amount of network capacity relative to the amount of generation capacity installed at some locations. As noted by Rai and Nelson (2019), these issues are particularly acute for VRE plant. Most new-entrant VRE plant have co-located with incumbent VRE plant.…”

“…1. The entry of more than 6,000 MW of gas-fired plant (both intermediate and peaking plant) over the decade to 2009, with more than half of this capacity (3,600 MW) entering in and 2009. Rai and Nelson (2019 note this investment occurred in response to both policy signals 2 and the drought-induced wholesale electricity price spikes of 2007-2008.…”

“…The exit of high-capacity factor (primarily, coal-fired) plant over a relatively short three-year period (2014)(2015)(2016)(2017); between June 2014 and June 2017 over 4.1 GW of coalfired plant exited the NEM. This exit of plant at-scale unwound all the excess capacity in place at NEM-start, and occurred suddenly and unexpectedly, partly contributing to the doubling in wholesale prices across the NEM between 2016 and 2018 (Rai and Nelson, 2019;Simshauser, 2019).…”