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New Infrastructure Australia priorities and reforms report released

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AGL Energy
17 February 2016

Infrastructure Australia has today released its Australian Infrastructure Plan Priorities and reforms for our nation’s future report which outlines strategic policies and priorities that could be pursued across several national infrastructure categories to underpin a productive and prosperous Australia into the future.

The report includes a number of recommendations to 'complete the National Electricity Market' reforms that began in the 1990s, and to employ emerging technologies to improve the productivity of existing infrastructure and reduce costs for energy users. The associated financial modelling suggests that these reforms could generate additional Australian GDP per annum of $1.7 billion in 2031, and $2.3 billion in 2040.

AGL supports the recommendation to deregulate retail electricity markets in all jurisdictions.  As recently published research from AGL economists demonstrates, deregulated electricity markets facilitate greater competition and innovation in product offerings, allowing customers to ‘shop around’ to access greater discounts and to select products that suit their circumstances.  We also welcome recommendations to transition to more cost-reflective network tariffs, which encourage efficient use of energy, reduce cross-subsidies between customers and support demand side participation (through the use of distributed technologies including solar PV, battery storage and digital metering) in a way that alleviates strain on networks at peak times, and ultimately reduces the system-wide infrastructure costs for all energy users.

AGL also supports recommendations to 'work with the private sector to develop a cohesive strategy for supporting a transition to a lower emissions electricity generation sector at lowest cost to users and taxpayers'.  Government policies that facilitate sustainable market outcomes are needed to stimulate the significant investment required over the coming decades to decarbonise and modernise Australia's electricity sector.

The Powering Australian Renewables Fund (announced by AGL this month) seeks to address one of the challenges for renewable energy investment - the allocation of risk among market participants for utility-scale projects to meet the 2020 Renewable Energy Target.  However, other challenges remain, such as the orderly exit of aged emission intensive generation to facilitate sustainable economics for new projects.  Several articles by AGL economists have been published on these issues, see Energy-only markets and renewable energy targets: Complementary policy or policy collision? and Australian Climate Change Policy – Where To From Here?