AER publishes State of the energy market 2014 report

The Australian Energy Regulator has published its eighth State of the energy market report, highlighting that declining energy demand is bringing structural shifts across the entire industry.

‘In the wholesale electricity market falling demand is resulting in enough surplus generation capacity to delay significant new investment for up to a decade,’ AER Chair Paula Conboy said.

‘Weaker demand is also translating into lower wholesale prices.’

A similar trend was emerging for the networks, with lower levels of demand removing the need for major expansion projects. Reduced investment is flattening revenue requirements.

‘But we’re seeing a greater focus on demand response and small scale local generation,’ Ms Conboy said.

‘Alongside this, pricing and metering reforms are underway to help consumers use their electrical appliances more efficiently to save money.’

In retail, the abolition of carbon pricing contributed to lower electricity prices in most jurisdictions in 2014, although carbon emissions from electricity generation rose as coal fired generation increased its market share. There was also evidence of more widespread retail price discounting during the year.

‘But many customers do find energy contracts complex and struggle to compare retail offers,’ Ms Conboy said.

‘That is why in 2015 the AER will be rolling out improvements to the Energy Made Easy price comparison website to make it easier for consumers to compare retail offers.

In gas, liquefied natural gas export projects in Queensland are nearing completion. But the ramp up of gas production for LNG, at a time of subdued domestic demand, caused market volatility in 2014.

‘Gas prices in the Brisbane hub of the short term trading market fell close to zero late in the year. But this is likely to be temporary until the LNG projects are fully online in 2015,’ Ms Conboy said.

The AER is an independent body regulating energy markets and networks in the eastern and southern Australian states. Its functions are set out in national energy market legislation and rules.

Issued date: 
19 December 2014
AER reference: 
NR 29/14