National Electricity Market

In Australia, the National Electricity Market is rapidly becoming dysfunctional, with power shortages, blackouts and soaring prices making headlines.

Private companies are refusing to invest in new fossil fuel generators to replace those that have closed. This “investment strike” is due partly to uncertainty about carbon pricing and partly to increasingly volatile spot prices received by generators.

If South Australia were a country, its citizens since July 1 would have been paying the highest residential electricity prices of any nation in the world, edging out Denmark.

Throughout most of Australia, the new financial year brought spiralling energy charges. For an average Canberra household without rooftop solar, the combined cost of electricity and gas over 2017–18 will rise by $580.

The public debate over the problems of electricity supply displays a curious disconnect. On the one hand, there is virtually universal agreement that the system is in crisis. After 25 years, the promised outcomes of reform in the electricity industry — cheaper and more reliable electricity, competitive markets and rational investment decisions — are further away than ever. 

The Victorian Labor government has announced an “ambitious and achievable” Victorian Renewable Energy Target (VRET). This target will commit the state to generating 25% of its electricity from renewable energy by 2020, and 40% by 2025.

Australia's large energy companies appear to prefer to accept fines for not building renewable energy rather than build it and weaken their investments in coal and gas generation.

When the Tony Abbott government passed legislation to reduce the Renewable Energy Target (RET) by about 20% in June 2015, some supporters of renewables hoped that an end to policy uncertainty would free up finance for investment and get planned projects into the construction phase.

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