Opening statement from AEMC Chief Executive Anne Pearson

Monday 18 March 2019, Sydney hearing

Thank you, if I could make a few opening comments ahead of my formal evidence.

I am the Chief Executive of the Australian Energy Market Commission, which is the rule maker for Australia’s electricity and gas markets.

We also advise the Council of Australian Governments Energy Council on  energy market development.

We make binding rules for the energy sector, which is a very powerful tool.

Everything we do must be in the long-term interests of consumers, as that’s our obligation required by law.

We sit on the Energy Security Board which plays an important role in coordinating reforms to safeguard Australia’s energy system.

Everyone in the Committee would agree we face critical challenges ahead as Australia’s energy sector restructure gathers pace.

As an independent agency we offer advice to energy ministers without fear or favour and, appropriately,  it’s the political process that will determine policy targets and outcomes.

However, the AEMC remains very focussed on putting the energy consumer first and taking care of consumer interests by making sure least cost and targeted solutions are found to address challenges ahead, whatever they may be.

Our focus is on frameworks to support the provision of electricity to consumers in a reliable and secure way. And it’s vitally important to understand that the more costs that go into the system, the more costs have to be passed through to households and businesses.

A secure, reliable and affordable energy supply in an essential input into the Australian economy.  And as such, it’s critical to avoid unnecessary costs so consumers don’t pay more than they have to for  that.

I will touch on some of the terms of reference, particularly the larger issue of getting the overarching policy framework right so it can support new investment in the energy sector, and I am happy to expand on that with the committee today.

We need long-term policy certainty so that we can  address most effectively the issues that arise, as our energy market is in the middle of a transformation  , the likes of which our country has never seen before.

Importantly, we need that certainty so we can respond to the challenges in  a timely way so that investments are made in time.

Investments in the energy sector are capital intensive, and take many years to plan and build and, therefore, long-term in nature. And the general debate around energy issues should not be distracted by short-term issues.

Our policy framework needs to acknowledge the community’s interest in taking action on reducing emissions, which means integrating energy and climate policy.

On current trends we are going to see over the next decade or so a market where consumers are increasingly driving change – a rapid leap in the use of solar rooftop PV and possibly battery storage as prices drop, and the development of microgrids or peer to peer trading is taken up in many communities.

The technology revolution is offering new opportunities and benefits for customers to take control of how they buy, sell and use energy.

Over time, this should allow for greater utilisation of the existing stock of generation and network capacity, lowering average costs for all consumers.

The increasing ability of customers to generate and manage their energy use should reduce reliance on the grid, reduce peak demand and, in turn, reduce network costs.

But, there are also challenges that we are addressing in order to realise the full benefit of new technology and to meet consumer expectations.

For consumers the challenges cover two aspects – enabling choices for those people who can choose to be active participants (prosumers). But the second, and equally important challenge is, at the same time we  need to make sure that all consumers are protected, especially those who are constrained in some way from being active in new markets.

For the market and system operator the changing landscape is driven by aspects such as:

• Ageing generators - they are retiring and being replaced by new technologies with vastly different characteristics.  This is changing the way the power system needs to be managed.
• The need for Expanded networks  - enhancements to our networks are required to connect new wind and solar farms that are setting up in more remote and sometimes difficult geographic locations – with all the technical complexities that brings.
• There is increased  and growing penetration of distributed energy resources such as rooftop solar PV, smart home systems and batteries – this does  make it more complicated to predict the shape of electricity demand over the course of a day, and also harder to control frequency and voltage minute by minute across the grid.
• Our changing weather patterns also place extra demand on the power system.

These changes are requiring  significant new investment in the energy sector so that new technology can be integrated and utilised, and that the power system can be managed securely.

There are many dots to join as we continue to adapt energy markets and regulatory frameworks in response to changing technologies and changing consumer choices and preferences.  Working together, with the other market bodies, the ESB and all of our stakeholders we can meet consumer expectations for a well designed, effective and efficient energy system.

 

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