The electricity market in Australia is an important and complex system that plays a significant role in the national economy. It is comprised of a mix of private and public sector stakeholders, each of whom has a different role to play in the functioning of the market. In addition, the market is regulated by a number of government agencies and regulatory bodies to ensure that it operates in the best interests of consumers. In this, the first of a series, we will introduce the key market participants.
The electricity market in Australia is made up of a variety of participants, including electricity generators, electricity retailers, network businesses, traders, and consumers. Electricity generators are responsible for producing electricity, which is then sent to the national electricity grid. Generators typically use coal, gas, or renewable sources such as wind, solar, and hydroelectricity to generate electricity. Each generation technology comes with its own advantages and disadvantages. The usefulness of a generator to the market can be measured in a number of ways including the levelized cost of energy LCOE (a measure of the cost of electricity produced over the assumed lifetime with a return on the capital investment), the carbon intensity of the electricity produced, the reliability of the plant, and the capacity of the plant to respond quickly to either ramp up or to reduce its generation capacity.
Electricity retailers are responsible for selling electricity to consumers. Retailers purchase electricity from generators and resell it to consumers. Retailers can offer different types of electricity contracts, such as fixed-price contracts or variable-price contracts, to meet the needs of their customers. Retailers effectively sit in between the ‘market’ and individual consumers. Their capacity to innovate is limited by the regulatory regime which specifies everything from what is included on an energy bill to how many days a customer must be given to pay the bill.
Transmission businesses are responsible for the infrastructure that transports electricity from the generator to the consumer. This includes the high-voltage transmission lines and other infrastructure. Distribution businesses are responsible for the lower voltage network and the ‘poles and wires’ you see on a typical residential street.
Traders are responsible for buying and selling electricity in the wholesale market. Traders purchase electricity from generators and resell it to retailers. Traders also manage electricity contracts, such as forward contracts, futures contracts, and options contracts.
Finally, consumers are the end users of electricity. Consumers purchase electricity from retailers in order to power their homes, businesses, and other activities.
The Australian electricity market is regulated by a number of government agencies. The Australian Energy Market Operator (AEMO) is the independent market operator responsible for managing the operation of the wholesale electricity market. The Australian Energy Regulator (AER) is responsible for regulating electricity prices, regulating retailers in most of the eastern states of Australia, and ensuring that electricity networks are reliable and efficient. The Clean Energy Regulator (CER) is responsible for regulating renewable energy scheme, and the Australian Competition and Consumer Commission (ACCC) is responsible for enforcing competition laws in the electricity market.
The electricity market in Australia is a complex and highly regulated system that plays an important role in the national economy. It is made up of a variety of participants, each of whom has a different role to play in the functioning of the market. In addition, the market is regulated by a number of government agencies to ensure that it operates in the best interests of consumers.