Home' Future Building Australian Infrastructure Review : Volume 3 Number 2 Contents 66 futurebuilding Volume 3 Number 2
choice of more than a dozen retailers competing
for their business.
Competition has broadened beyond price, and
includes a variety of innovative product and service
offerings. In fact, the St Vincent de Paul Society
has observed that the deregulated, competitive
retail market in Victoria does more for low-income
households than retail price regulation in states like
New South Wales and Queensland.
An example: the variety of offers available
in the market means that households with high
energy use can choose retailers that offer products
with higher xed costs and lower variable costs,
while those households with lower energy use
can choose a different retailer with the opposite
product offering. These same households can then
access a discount on these rates and a further
discount if they pay on time.
Retail price regulation is a one-size- ts-all
approach, and the discounts available in the
competitive market are linked to this in exible
regulated product. This does not bene t many low-
Retail price regulation and the introduction of
exible (or what is often referred to as time-of-use)
pricing structures is also critical if we are to help
customers to manage their energy use throughout the
day and get the most from their energy expenditure.
Time-of-use pricing is also imperative if we are
to begin to tackle peak demand and improve the
productivity and cost structure of the energy industry.
Today, retail price deregulation is the single most
important reform that is required for Australia's energy
markets if we are to deliver tomorrow's opportunities.
What about the Renewable Energy Target? One
policy area where we have the opportunity to stop
and re ect on our objectives and the impact of their
delivery is the RET. There is a lot to like about the RET.
It is one of the few current policy settings that have
bipartisan political support, and it has successfully
encouraged new renewable generation investment.
It uses a market price signal that encourages least-
However, a key question that faced the Climate
Change Authority in its review of the RET was how
to de ne the 20 per cent target. Rather than rush
out and take a position, we commissioned some
analysis from ACIL Tasman. This modelling found
that, unchanged, the current 20 per cent Renewable
Energy Target will actually deliver over 25 per cent
renewable energy at a cost of nearly $54 billion from
now until 2030.
In the context of falling demand, this target could
be recalibrated to deliver the original policy intent
of 20 per cent renewable energy, while reducing the
overall cost of the $54 billion subsidy by $25 billion.
Across the economy, $25 billion is a big saving to
consumers -- $840 each -- in the context of rising
The current design of the RET also puts incredible
pressure on the wholesale electricity market. A policy
that forces new capacity to be built in an already
oversupplied market, with falling demand, calls into
question the sustainability of the market itself.
While policy stability is very important, we need
to balance this with a scheme design that can adjust to
uctuations in demand and not impose unnecessary
costs on the economy and our customers.
In conclusion, Australia has shown that it has
the capability to build a sustainable, world-class
energy system that underpins economic, social and
Building on the existing energy supply
infrastructure, we can work towards lower
carbon emission levels and maintain high levels
of supply reliability.
We can introduce smart grid technology, and
we can deliver power more ef ciently to customers,
giving them more information and greater choice
about the way they use energy.
The opportunity, but also the obligation, for
Australian governments, is to maintain the reform
agenda towards achieving a functional, competitive
and ef cient national energy market.
This market works, but we need to be careful
that we don't ask too much of it, as it could begin
to break down.
Australia's energy markets have served us well.
We should protect and develop them.
We need to get out of regulating prices and get
on top of peak demand to ensure the sustainability of
the energy sector.
We need to tidy up the raft of climate change
schemes -- including the RET -- and move to a least-
cost approach to emissions reduction and renewable
deployment at sustainable levels.
We need to support gas development and gas
markets to the bene t of industry, consumers and the
community. But, most importantly, we need to get the
politics out of energy supply.
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