Our energy market was never fit for purpose, because it was obsessed only with price | RenewEconomy

Our energy market was never fit for purpose, because it was obsessed only with price

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Our electricity market was never fit for purpose, and the barriers to fundamental change are challenging and deeply ingrained in energy culture.

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The Energy Security Board and Australian Energy Market Operator are beginning to frame the design of our post-2025 electricity market.

This supposedly reflects the view that our present market design is “no longer” fit for purpose.

Let’s be clear: it was never ‘fit for purpose’ from the day the Victorian market began in the mid-1990s, followed by the National Electricity Market.

In 1992, the State Electricity Commission of Victoria published scenarios showing how iit could achieve a 20% reduction in emissions by 2005, using experience from its Demand Management Action Program and renewables: for example the SECV and Victorian Solar Council had installed our first ‘large’ grid- connected wind generator at Breamlea, near Geelong, in the mid-1980s.

Then the economic fundamentalists and ruthless asset sale experts took over when the Kennett government was elected in late 1992. Energy market design ignored demand-side action. Support for renewable energy was slashed.

The National Grid Management Council, tasked with design of the market, initially framed some reasonable objectives in 1992:

  • to encourage the most efficient, economical and environmentally sound development of the electricity industry consistent with key National and State policies and objectives;
  • to provide a framework for long-term;
    least cost solutions to meet future power supply demands including appropriate use of demand management;
  • to maintain and develop the technical, economic and environmental performance and/or utilisation of the power system.

But these were modified over time to exclude environment and focus on electricity prices not overall cost. They evolved into ‘economic’ objectives—actually short-term narrow financial objectives limited to energy supply.

The 2002 Parer Review identified problems with market design that have still not been fixed.

The Australian Energy Market Operator and Energy Security Board are doing some good work reframing future energy market design. But the barriers to fundamental change are challenging and deeply ingrained in energy culture.

    • Alan Pears is a senior industry fellow at RMIT University, advises a number of industry and community organisations and works as a consultant.Originally published on Renew Magazine. Reproduced with permission of the author.
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