Home' Future Building Australian Infrastructure Review : Volume 3 Number 2 Contents 64 futurebuilding Volume 3 Number 2
ownership in the competitive sector that continues
to this day. And it has so far managed to survive the
misalignment between good energy policy and good
Over the past three years, the pursuit of broader
political objectives has started to impact the policy
stability of the energy sector, and has put the energy
market under incredible pressure.
Since the 1980s, there has been a decline in the
relative contribution to GDP from goods-producing
industries, such as manufacturing, and a rise in the
contribution from service industries.
More recently, the mining sector has grown as
developing countries like China and India are using
more and more of Australia's abundant mineral
This change in Australian industry has signi cant
implications for energy use.
First, service-related industries are less energy-
intensive and therefore we have seen a decline in
Australia's overall energy intensity, even though
energy production has increased.
Second, there is a change in the composition and
location for industry demand.
Household demand for grid-connected
energy has also declined in recent years, and the
relationships that customers have with their retailers
are also fundamentally changing.
Consumers are seeking a deeper relationship:
they want advice and support on how they can better
manage energy in their homes.
New technology, such as smart meters and
software that lets customers take full advantage
of them, will give customers a greater capacity to
manage their demand.
Innovative products and tariffs will emerge on
the back of that technology. This includes tariffs
that empower consumers to better manage their
energy usage, lower their carbon emissions and
reduce their bills.
We are already seeing the introduction of products
such as solar PV and solar hot water for consumers
to install in their homes as a means of managing their
energy use from the network; however, regulation
will be a key barrier to these important changes.
Historically, Australia's energy sector has been a
source of considerable prosperity for all Australians
by providing access to low-cost energy for businesses
It is imperative that the sector continues to meet
the future economic, social and environmental
challenges of the country. If it performs poorly, the
international competitiveness of major Australian
industries will be undermined, our economy will
suffer and our standard of living will decline.
Therefore, any discussion on the requirements
and pathways for a functional and efficient
national energy market should begin with an
assessment of how we transform energy supply to
meet these structural challenges and changes in
Energy reform is a partnership. It takes a lot of
stamina in a reform journey where governments,
industry and consumers all need to work together.
I would like to talk about two key areas in
which government and industry must work together
to achieve sustainable, low-cost energy supply
for consumers: retail price deregulation, and the
Renewable Energy Target (RET).
First, retail price deregulation. The motivation
behind the introduction of the NEM and other
competition reforms was a desire to raise the
ef ciency and productivity of electricity supply in
eastern Australia by taking advantage of potential
cost savings from the interconnected state networks.
In essence, the NEM should have boosted
productivity levels by allowing more ef cient use
of generation and network capacity. While we have
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