The Energy Regulation and Markets Review - Stikeman Elliott

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Market developments
Australia
AEMC priorities
In 2011, the AEMC undertook an assessment of the Australian stationary energy sector,
to identify current challenges and to develop a set of key priorities for the development of
this sector. On the basis of this review, the AEMC developed three key strategic priorities:
a creating a predictable regulatory and market environment for rewarding
economically efficient investment;
b
c
building the capability and capturing the value of flexible demand; and
ensuring the regulation of transmission and distribution networks promotes
timely investment and efficient outcomes. 17
The challenges identified included the interaction between the gas market and the NEM
as a result of growth in gas-fired electricity generation, which may lead to vulnerability
of the NEM to gas supply shortages. The AEMC also identified significant future
investment requirements to improve transmission networks throughout the NEM.
Significant investment in low emissions intensity generation capacity will also
be required to address climate change policy such as the carbon emissions pricing and
the Renewable Energy Target (‘RET’) under the Australian Government’s Clean Energy
Future Plan. Climate change policy is also predicted to produce an increase in wind
generation and gas plant, which could lead to greater spot price volatility, potentially
affecting the resilience of energy markets. The AEMC has predicted that, as a result
of this, generators and retailers may change their financial risk management strategies.
Mechanisms will also need to be established to limit the extent of disruption of the
market as a whole if individual participants experience financial hardship. 18
Liquefied natural gas and coal seam gas
In addition to Australia’s national gas reserves, Australia also has substantial reserves of
coal seam gas (‘CSG’) in both NSW and Queensland. This, together with long-term
projections of rising international energy prices, has spurred the development of several
Liquefied natural gas (‘LNG’) projects. Construction of three export LNG projects is
underway, with first CSG–LNG exports expected in late 2014. Five further proposals
are under consideration. If all current proposals are developed to full capacity, this would
represent a potential LNG export market for Queensland of more than 50 million tonnes
per annum. 19 CSG production has also reshaped the domestic market by providing a
new source of gas supply.
17 AEMC, Strategic Priorities for Energy Market Development 2011, available at www.aemc.gov.
au/Media/docs/Strategic%20Priorities%20for%20Energy%20Market%20Development%20
-%20low%20resolution%20pdf-a702b945-89b9-4d09-a8b0-7c31aa7a47de-2.PDF.
18 Id.
19 Queensland Department of Employment, Economic Development and Innovation,
Queensland’s coal seam gas overview, February 2012, available at http://mines.industry.qld.
gov.au/assets/coal-pdf/new_csg_cc.pdf.
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