08/05/2017

Gilbert + Tobin has released a report that provides global insights into the transformational changes currently occurring in the Australian energy market and calls for rapid policy reforms.

The Gilbert + Tobin white paper ‘Wrestling with the electricity market transformation’ highlights how Australia’s response to recent upheaval in energy markets following the South Australian black outs in September last year compares with global experiences in the United States and United Kingdom.

Gilbert + Tobin Partner Simon Muys says, “What we have identified is that there are two major policy challenges occurring at the same time globally – a revolution in the way that individuals and industrial customers generate and use the grid, on the one hand, and the impact on wholesale energy markets like the NEM of significant amounts of subsidised renewable generation, on the other.  

“Together, these twin forces have created a sense of crisis and panic around energy policy that risks unravelling a two decade-long commitment to nationally coherent and integrated policy.  We have the most politicised energy environment in a generation.”

The report finds that Australia is not alone in this regard.  Report co-author, Geoff Petersen, says, “Both the UK and US have experienced a similar politicisation of energy over recent years.  In the late 2000s, high power prices in the UK saw direct government intervention significantly reshape their wholesale market.  Hurricane Sandy in 2012 saw similarly radical political intervention in New York.”

The white paper predicts sustained high electricity prices continuing to put pressure on the structure of the wholesale energy market and for this to continue to test the politics needed to maintain Australia’s integrated approach.  Mr Muys says, “In our view, now more than ever, political swagger and rivalry needs to be replaced by reasoned, careful and thorough policy analysis if Australia is to avoid costly and lasting policy mistakes. A question at the heart of our report is whether it is already too late for this.”

The white paper also finds that there is a need for Australia to develop new policy approaches to stimulating innovation in the grid and other technologies, such as smart meters and electric vehicles.  “Our global peers across the US and Europe have more effective mechanisms for incentivising innovation in the development of the grid.  They are also doing more around important issues like smart meters and electric vehicles.”  

Gilbert + Tobin Partner Chris Flynn also said that fixing carbon policy was necessary to deliver investment in transitional generation, like gas.  “It is genuinely acknowledged that emissions intensity schemes are the most economically efficient way to encourage investment in renewable energy, while maintaining energy security and improving environmental outcomes” said Mr Flynn.

The whitepaper is based on findings from discussions with global experts during an international study tour undertaken by Gilbert + Tobin’s energy regulation experts earlier this year.  It provides global insights on renewables, distributed resources, NEM design and an evolving grid – with recommendations for Australian energy policy and regulation.

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