Energy & Utilities

Striking a balance in WA’s power shift

20 Mar 2015, by Informa Insights

Western Australia is looking forward to hearing about the findings of WA’s Electricity Market Review.

Alan Dixon, President of ATCO Gas Australia will be contributing to the discussion as a guest speaker at the upcoming WA Power & Gas Conference and accepted to comment on how outcomes the Electricity Market Review may change the market.


Alan Dixon, President of ATCO Gas Australia
Alan Dixon, President of ATCO Gas Australia

It is hard to comment about how the outcomes of the review may change the market without actually knowing what the outcomes are but as President of the largest natural gas distribution network in Western Australia, I am certainly supportive of the Government’s recognition of the requirement of energy market reform and the process that has been undertaken to date. I am looking forward to the findings of the Electricity Market Review as any changes in the electricity market have the potential to bring about changes and reforms which could positively impact the gas industry in WA.

If we look back to when the Western Australian Energy Market (WEM) was established in 2006, a number of objectives were set out to be achieved. These objectives have been achieved to varying degrees, however, since 2006 the market has changed significantly. There has been a trend of declining demand for electricity, rising network costs, increasing fuel costs, the penetration of renewable technologies into markets and the impacts of past and present Federal and State Government environmental and energy policies (including the Carbon Tax which has come and gone) and initiatives (for example the photovoltaic solar panels scheme), all of which have contributed to forming a different energy market landscape to that which existed when the WEM was created.

Although the system is producing a safe and reliable supply of electricity and services, in light of the escalating costs of electricity supply to consumers, the current level of subsidy is unsustainable in the long term, which the Government has recognised.

Experience in Australian and overseas energy markets has demonstrated that it is very difficult to affect change to any one element of the market without impacting other elements and without taking a holistic approach to reform. What we have seen since the WEM was created is that by artificially constraining increases in retail electricity costs, there are a number of unintended consequences, namely the direct negative impact on natural gas as a competitively priced and cleaner energy choice, and price signals to consumers, and investment signals to other energy users, are distorted. The result is an inefficient market which harms the long-term interests of consumers, which goes against the very aim of efficient energy markets.

I would like to see the Electricity Market Review provide the platform for real energy market reform:

  • support an industry structure that allows for private sector participation, competition and choice to drive and support the delivery of innovation and the best sustainable economic outcome for all stakeholders;
  • promote a regulatory process that that is transparent, effective and free of conflicts of interest that is designed to minimise risk, provide certainty and stimulate investment;
  • create a market where pricing is transparent and ensures cost reflectivity such that electricity pricing reflects the true price of production, transmission and distribution, (as is the case currently with gas pricing) and that adequate returns for investors and owners are achievable in order to ensure long-term asset and service investment and viability;
  • bring about the process whereby the State strives for an appropriate mix of fuels and alternative energy sources utilising Western Australia’s natural resources to its advantage and that the transition to cleaner fuels and alternative fuel sources continues at a pace commensurate with the robustness and efficiency of technology at relevant points in its lifecycle and a balance sought between the cost of transitioning to cleaner fuels and alternative energy sources and the costs to be borne by consumers;
  • requires that those participating in the reform process take a long term view that extends beyond the election cycle. With bipartisan support, government and industry can work together on energy reform providing a stable environment for long term investment decisions which will, ultimately, provide economic benefits to consumers

WA Power and GasAlan will be participating in a panel discussion with David Agostini, Chairman of Western Australian Energy Research Alliance (WA:ERA) and Matt Brown, Executive Director of DomGas Alliance, to discuss how the reforms of the gas markets in Western Australia will secure an affordable supply of gas both domestically and internationally. Find out more today.

 

 

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