How governments can better direct Australia’s electricity market – Grattan Institute

How governments can better direct Australia’s electricity market – Grattan Institute

Australia’s electricity system has for the last more than 20 years been based upon a fundamental principle, and that is that if governments were to implement a well regulated well-structured and well managed market, that would be the best way to deliver affordable and reliable energy for households and businesses. When things go wrong, and they do sometimes, governments feel that they have to act. But what tends to happen when they do that, is that things don’t go as well as they would like because the very fact of them intervening in the market in some sort of bravado way creates exactly the opposite of what they’re intending. And so what that does is puts off investment. The result for consumers both households and businesses over the longer term inevitably is less reliability and higher prices which is exactly the opposite of what the government wants to actually achieve with these interventions. We want to make sure that when big coal fired power stations close, as they will, as they must over the next 30 or 40 years, they don’t do so in a way that disrupts the reliability of supply of electricity because that would certainly set back the energy transition to a low emissions future dramatically if they did. We think that a return to a rules based institution implemented process is the way to go. That’s not going to be easy to turn it around. It means governments will have to have confidence in the fundamental market structures. But remember that structure is their structure. It’s not imposed by them by some weird economist. It basically is a structure that we’ve agreed works and if we get back on track it can work and that will be good for governments and consumers, both homes and businesses, well into the future.

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