From First Place to Last: The National Electricity Market's Policy-Induced 'Energy Market Death Spiral'

Abstract

Microeconomic reforms that established Australia's National Electricity Market during the 1990s were extensive. State-owned electricity commissions were vertically and horizontally restructured and many of the restructured businesses were privatised. A mandatory gross pool market was established to facilitate competition amongst generators and retailers and quickly became one of the best-performing wholesale electricity markets in the world. Networks remain regulated under unresponsive 5-year rate cases with flat-rate tariffs persisting, while inflexible 'subsidy schemes' proliferated and forced generation plant entry into an already-oversupplied market. End-use electricity tariffs have since doubled. Misguided and overlapping policy failures are primary causes.