"The Electricity Infrastructure Roadmap released by the NSW Government today is a thoughtful approach that will do significant good for energy users. The strength of this proposal highlights how fragmented the allegedly-National Electricity Market is becoming," Innes Willox, Chief Executive of the national employer association Ai Group said today.
"Rebuilding an energy cost advantage for industry and taking pressure off households will mean navigating a massive transition in our electricity sector to new technology, new infrastructure, higher demand and a more active role for energy users. Intense uncertainty in energy policy and the energy market raises the cost and difficulty of doing this. Addressing uncertainty is the number one benefit of the proposed NSW approach, and would plausibly lower costs overall.
"While the policy is a strong proposal, continued consultation and the elaboration of more detail, especially on the workings of the transmission planning process, will be needed to ensure this approach is as good as it can be. Energy users would ultimately bear the costs of the guarantees provided to energy project developers. NSW's proposed planning and competitive processes are intended to ensure that energy users aren't paying to feed a herd of white elephants. We need full confidence that they will work.
"However, the announcements also continue the fragmentation of the National Electricity Market, with State after State announcing their own set of policies, contracts and mechanisms to drive new energy investment. This is understandable, given the pressing need for action and the repeated failure of national reform initiatives, most recently the National Energy Guarantee. But there are important risks in a state-by-state approach to a national market. Inconsistent approaches can increase costs and confuse the market. Narrow State perspectives can miss opportunities to make everyone better off through trade and cooperation. The expertise of existing national institutions can be sidelined in favour of inexperienced new State bodies.
"NSW's proposed system of contracting, financing, transmission reform and independent administration appears to be well thought through and responds to experience from elsewhere in Australia and overseas. NSW should collaborate with the other States and encourage them to work along similar lines; make use where possible of the Australian Energy Regulator, Australian Energy Market Operator and Australian Energy Market Commission; and align its new processes with the national Integrated System Plan.
"Energy debate has repeatedly let the perfect be the enemy of the good, and we should not make that mistake again. We commend NSW for its willingness to take bold action. Now it is time for collaboration with energy stakeholders and other jurisdictions to ensure that action is as effective and efficient as possible ," Mr Willox said.
