AEMC Chairman, John Pierce, has addressed the World Forum on Energy Regulation in Canada. He participated in the session on environmental impacts of the current electricity generation mix (12.30am 16 May 2012 AEST).

Chairman of the Australian Energy Market Commission, Mr John Pierce, has described the National Electricity Market as a model for successful transformation of stationary energy sectors in response to climate change.

The world’s energy markets are at a turning point, he said.

“It’s important to carefully consider the potential of market mechanisms to deliver major government reforms – especially as political focus shifts toward addressing the effects of climate change.

“We have important choices to make between different fuel sources, different technologies, different renewable fuel options, different approaches to demand management and between complex regulatory alternatives.

“Making good decisions will depend on our ability to make the costs of energy supply as efficient as possible to ensure the best results for consumers in the long term.”

Markets are moving away from the current fuel mix to produce electricity from less carbon intensive sources, Mr Pierce said.

“In a political context where environmental concerns are increasingly paramount, policy makers might criticise the market frameworks and call for more regulation or direct intervention. Such calls are understandable but excessive interference in market functions can have serious implications for market stability.

“The recent history of Australia’s national electricity market shows how major reforms can be implemented through careful market design and management,” Mr Pierce said.

“At the same time there are sectoral and structural challenges that will require creative thinking to resolve.”

Key points

• South Australia has one of the world’s highest penetration levels of wind generation – although it tends to be available outside periods of highest demand.
• Small scale solar rooftop generation produces more expensive abatement than that achieved by centralised large scale technology – although its effectiveness is increased when a carbon tax is in place.
• Australia may be cutting overall electricity usage as the less energy intensive services sector grows as a proportion of the economy – although energy intensive household appliances continue to push peak demand growth at a faster rate than average energy demand.
• Gas is the most likely candidate on the supply side to replace coal generation – although broader interlinkages between electricity and gas markets carry price and supply risks that will require careful oversight.

Read the J. Pierce conference paper

The Australian National Electricity Market: Choosing a new future. Conference Paper, World Energy Forum on Energy Regulation V, 13-16 May 2012, Quebec City, Canada

For information contact:

AEMC Chairman, John Pierce (02) 8296 7800

Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817