Avoiding gridlock: policy directions for Australia’s electricity system

Overview

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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.

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Green gold sets out a framework for determining which industries are suited to public investment and applies it based on present conditions.

It outlines principles to shape public spending, and includes example of how an on-budget investment could be structured.

Avoiding gridlock 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.

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.

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