Avoiding gridlock: policy directions for Australia’s electricity system | DISCUSSION PAPER | December 2016

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  • Avoiding gridlock: policy directions for Australia’s electricity system | DISCUSSION PAPER | December 2016

Today CPD is releasing a new paper titled Avoiding Gridlock: Policy Directions for Australia’s Electricity System.

The paper is written by Alexander Marks, who was the recipient of the 2016 CPD Sustainable Economy Program Studentship. The paper is based on research Alex completed at Oxford University’s Smith School for Enterprise and the Environment.

Avoiding Gridlock highlights that an updated regulatory approach is required to build the secure, sustainable energy system Australia needs to power a decarbonised economy in the 21st century.

 

Key documents

avoiding-gridlock-cover       avoiding-gridlock-pr

Discussion Paper                Press Release

 

Summary

Rising electricity prices, policy changes and technological advances have supported rapid uptake of rooftop solar panels. Wide adoption of improved battery storage technology looks set to follow. These trends are paving the way for a future energy system where centralised renewable generation of electricity is complemented by distributed generation by households who can carefully track and tailor their electricity consumption, store energy for later use, or feed it back into the system.

This future is well and truly within sight, but only if policymakers and the other actors who shape our electricity system get the difficult transition phase right.

 

“The rapid uptake of renewable technology and leaps forward in energy efficiency and storage have been game changers for generators, distributors, retailers and consumers of electricity. If harnessed effectively, these changes can move us closer to the sustainable energy system we need to power a decarbonised Australian economy in the 21st century. But this will only happen if the way we regulate electricity markets keeps pace.” Alexander Marks, Avoiding Gridlock author

“People going off grid means that the costs of the grid fall on a shrinking customer base. Even more affordable battery storage and solar power will make this even more acute. This could pose real problems for the owners of network.” Ben Caldecott, Director of the University of Oxford’s Sustainable Finance Programme

“There are inevitably challenges integrating new technologies and services into existing markets and regulatory arrangements, which if not properly managed could lead to adverse outcomes for consumers. Our electricity sector needs to be fexible enough to accommodate innovation in a range of forms, while maintaining security, reliability and affordability.”  Preliminary Report of the Finkel Review

Avoiding Gridlock focuses on energy distribution networks, whose traditional role in transmitting electricity from distant powerplants to homes and businesses – and the value of the expensive poles and wires they use to do so – is being reshaped by these trends. The paper examines the role of massive infrastructure investment by distribution companies in driving up retail prices, and their past performance in rolling out innovative ‘behind the meter’ technologies like smart meters that can help households use electricity more efficiently and affordably.

It recommends that upcoming reviews of the energy system consider the following policy options:

  • Revamping the National Electricity Objectives so that distribution networks focus on whole-of-system resilience in a future of high penetration of distributed renewables and batteries and in the context of a changing climate
  • Restrict owners of electricity networks from competing in beyond-the-meter services and other naturally competitive markets, due to high risk of uncompetitive behaviour
  • Restrict the exclusive hold of networks so it onlcy applies to the parts of the electricity system that are core their business – i.e., the plants and wires
  • Legislate changes to the valuation and treatment of networks’ regulated asset bases, to reduce network tariffs and the cost burden of electricity bills on Australian homes and businsess.

Read the paper in full by following the links above, or check out media coverage and further reading on this issue below.

Media coverage

US energy giant GE backs states going own way on renewables, Peter Hannam, SMH, 12 December 2016.

High drivers for change, low ambition: Australia’s energy reform train crash, Sophie Vorrath, RenewEconomy, 16 December 2016.

Ring fencing: who should have power over your solar and storage?, Alexander Marks, RenewEconomy, 16 December 2016.

Further reading

Read more about Oxford University’s Sustainable Finance Program 

Preliminary Report of the Independent Review into the Future Security of the National Electricity Market (The Finkel Review), December 2016

Electricity Network Transformation RoadmapEnergy Networks Australia and CSIRO, December 2016

Preliminary Report and Update Report into Black System Event in South Australia on 28 September 2016, Australian Energy Market Operator, October 2016

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Blog Comments

I am most impressed with your paper. It presents an excellent broad overview of the issues involved. Are you or the CPD presenting a submission to the Finkel review? (due end february). I would like to discuss some issues particularly that we have no measurable performance targets. Without these we run “open loop” depending on unproven hypotheses as does most of public policy

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