TSI welcomes the review by the independent expert panel. This is a pivotal time in the evolution of the National Electricity Market (NEM) and decisions about wholesale market design will have lasting effects, not only on the energy market but also on Australia’s entire economy and prosperity for decades to come.
The terms of reference for the review describe a focus on ‘market settings in the National Electricity Market to follow the Capacity Investment Scheme. While this focus is appropriate, many related issues of market design are also critical to consider.
The expert panel identified five topics for focus as part of the initial consultation:
- Topic 1: Investment incentives
- Topic 2: Consumer interaction with the wholesale market
- Topic 3: Changing nature of spot electricity prices
- Topic 4: Essential System Services
- Topic 5: Enhancing competition
TSI’s submission focuses on topics 1, 3 and 5 in particular, although our comments have relevance across all topics.
There is also important broader context that has significant bearing on Australia’s electricity system and markets, including:
- The global context in which other countries are committing to and taking action towards decarbonisation.
- Future industrial and trade trends, opportunities and threats for Australia.
- Australia’s comparative advantage in energy production and energy-intensive industries.
Work by TSI, The New Energy Trade, has demonstrated that Australia can play a major role in global decarbonisation by leveraging its comparative advantage in renewable energy capacity and endowment of natural resources and minerals. By supplying green metals, fertilisers and fuels to the world, Australia can contribute to a reduction of up to 10% of global emissions. This will require the capacity to produce renewable energy many times larger than current demand. It is an enormous task but one that would have proportionate payoffs for Australia’s long term prosperity in a zero carbon world.
Standing in the way of realising this opportunity is a significant market failure: the lack of an effective system of global prices on carbon emissions. Green production technologies will be unable to compete with fossil-fuel powered equivalents while the latter do not pay for the damage they cause.
While the terms of reference of this review direct the expert panel to not consider options for implementation of carbon pricing, our view is that the panel should consider, and make recommendations on, how Australia can chart a course towards a comprehensive, economy-wide carbon price, compatible with international equivalents.
It is also important to recognise the strengths of the existing features of the NEM and to preserve and strengthen these, while adding complementary policies and measures capable of dealing with the challenges ahead.
TSI looks forward to making further contributions to future consultation as part of the review throughout 2025.
