Australia's energy markets, supported by a number of recommended improvements, are able to respond efficiently and reliably to the major changes that will result from the introduction of the Carbon Pollution Reduction Scheme (CPRS) and the expanded Renewable Energy Target (expanded RET) according to the final report of the 14 month review by the Australian Energy Market Commission (AEMC). 

AEMC Chairman, Dr John Tamblyn, today released the final report of the Review of Energy Market Frameworks in light of Climate Change Policies.  The Review assessed whether national energy market frameworks require adjustments to accommodate the introduction of the CPRS and the expanded RET. The Final Report has been submitted to the Ministerial Council on Energy for consideration and review.  

"The introduction of these climate change policies will result in a significant transformation of Australia's energy markets, requiring a shift to lower emission energy production," Dr Tamblyn said.

 "This transition will inevitably involve costs and risks.  Ensuring that our energy markets arrangements are sufficiently resilient and responsive will assist in minimising these costs and risks but cannot eliminate them entirely.

 "The existing competitive energy markets, supported by the efficient economic regulation of the monopoly network sector, continue to provide the most effective framework for responding to major changes in economic and policy circumstances."
Dr Tamblyn said. 

"In order to respond to the challenges of climate change policies, Australia's energy market frameworks need to be refined not redesigned." 

The recommended areas for change to energy market frameworks include:

  • Commitment to removal of retail price regulation where competition is found to be effective, while introducing increased flexibility in circumstance where regulation continues.
  • Introducing a new framework for connection of clusters of new generation to energy networks.
  • Reforming transmission charges to reflect the costs of investment required to allow electricity to flow between regions.
  • Introducing more cost reflective charges for generators to provide financial incentives for more efficient investment in and use of the network.
    • The final report also recommends improvements to the Western Australian market which relate to the existing frameworks for connections, use of the network and system dispatch. These matters will be for consideration by the Western Australian Government. 

"It is important to recognise that the Review has been undertaken in a changing policy environment. There will be a need for ongoing monitoring of the energy market as it responds to implementation of climate change policies so that the need for any further changes can be considered in a timely manner," Dr Tamblyn said. 

The scope of this Review included the National Electricity Market (NEM) States [Queensland, New South Wales, Victoria, Tasmania, South Australia and the Australian Capital Territory] as well as Western Australia and the Northern Territory. 

For further information contact:

AEMC Chairman, Dr John Tamblyn 02 8296 7800

AEMC Communications, Prue Anderson 02 8296 7800 or 0404 821 935