by David Blowers from the Grattan Institute has a piece in The Conversation (also on the ABC) headlined A high price for policy failure: the ten-year story of spiralling electricity bills. It’s not bad, and is notable for the observation that History may judge the introduction of competition to the retail electricity market as an expensive mistake. I don’t think we need to wait for history; in fact, we didn’t need to wait until 2017. Most of the problems that have subsequently emerged were evident when I first addressed this issue in a paper in 2001., published in the Economic and Labor Relations Review Here’s my conclusion The National Electricity Market is still developing. Some problems that have emerged in the early stages such as the disparity between the substantial price
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David Blowers from the Grattan Institute has a piece in The Conversation (also on the ABC) headlined A high price for policy failure: the ten-year story of spiralling electricity bills. It’s not bad, and is notable for the observation that
History may judge the introduction of competition to the retail electricity market as an expensive mistake.
I don’t think we need to wait for history; in fact, we didn’t need to wait until 2017.
Most of the problems that have subsequently emerged were evident when I first addressed this issue in a paper in 2001., published in the Economic and Labor Relations Review
Here’s my conclusion
The National Electricity Market is still developing. Some problems that have emerged in the early stages such as the disparity between the substantial price reductions for large customers and the largely unchanged prices paid by households will fade away as the market matures. Other issues such as the structure of the industry and the degree of horizontal and vertical integration will be resolved by a mixture of market processes and regulatory interventions.
Some problems, however, are likely to become more rather than less acute. The Australian National Electricity Market commenced operation in a period of oversupply so that problems of market power and excessive prices have not emerged until recently. It remains unclear whether an electricity auction market can produce adequate incentives for investment while generating appropriate prices for consumers. Similar problems are emerging in relation to the regulated monopoly component of the industry, the transmission and distribution sector. Regulators must set prices that do not reward inefficiency or allow monopoly profits, but nevertheless provide appropriate incentives for new investment. This is a delicate balance.
In the longer term, the problem of the environmental impact of an industry relying predominantly on carbon-based fuels remains to be addressed. A market solution would involve the creation of emissions credits that could be traded along with electricity in national markets. Although limited steps have been taken in this direction, much remains to be done.