AER publishes State of the energy market 2015 report

The Australian Energy Regulator has published its ninth State of the energy market report, highlighting how major structural shifts in the industry are affecting consumers.

“Electricity demand has recorded flat or negative growth for six consecutive years,” AER Acting Chair Jim Cox said.

“Consumers have cut their energy use by adopting solar water heating and energy efficient appliances, including air conditioning. They are also generating their own electricity, using solar photovoltaic panels.”

The impacts are being felt across the supply chain. In the wholesale market, subdued demand is keeping prices down, except in Queensland and South Australia, where local issues have caused volatility. Generators are shutting down surplus plant across the market.

“Maximum demand, which drives network investment, is running around 20 per cent below historical highs in NSW, Victoria and South Australia, requiring less network augmentation than in the past to deliver reliable energy supplies,” Mr Cox said.

Recent AER determinations forecast network investment to run around 25 per cent below previous levels.

“At the same time, the network sector is being transformed by metering and pricing reforms that will better inform consumer choice,”’ Mr Cox said.

The story for gas is complex. While domestic demand is flat, Queensland’s LNG projects are competing with domestic customers for gas.

“Domestic supply contracts are being struck with reference to global prices, and spot prices are volatile,” Mr Cox said.

“The industry is responding with new pipeline investments, and reforms are underway to promote efficient gas trading.”

These developments are translating into contrasting trends in the retail space. While subdued demand flowed through to lower retail electricity prices in most jurisdictions in 2015, trends in the gas industry edged retail prices higher.

“Technological innovations are allowing consumers to be active participants in the market,” Mr Cox said.

“This shift is blurring traditional demarcations between the wholesale, network and retail spaces. A critical challenge is to ensure the regulatory framework keeps pace with these changes, by creating the necessary space for competitive markets to drive choice and innovation, while maintaining adequate consumer protections.”

The AER is an independent body regulating energy markets and networks in jurisdictions other than Western Australia. Its functions are set out in national energy market legislation and rules.

Issued date: 
18 December 2015
AER reference: 
NR 28/15
Contact: 
AER Media inquiries 1300 138 917