Energy-only markets and renewable energy targets: Complementary policy or policy collision?

Title
Energy-only markets and renewable energy targets: Complementary policy or policy collision?
Publication Date
2015
Author(s)
Nelson, Timothy
Reid, Cameron
McNeill, Judith
Type of document
Journal Article
Language
en
Entity Type
Publication
Publisher
Economic Society of Australia Inc
Place of publication
Australia
DOI
10.1016/j.eap.2015.04.001
UNE publication id
une:18206
Abstract
Australia's 20% Renewable Energy Target (RET) was designed and implemented against a backdrop of several decades of continuous growth in electricity demand. Since the introduction of the policy in 2009 electricity demand has declined continuously. In this article, we analyse how Australia's National Electricity Market (NEM) has responded to falling demand and significant additional installed capacity as a result of climate change-related policies. We conclude that an energy-only market design, barriers to exit for incumbent plants, and time inconsistency of policy has resulted in investment in new renewable energy projects becoming largely intractable. In our opinion, changing the RET fixed GWh target will not alter this fact. To overcome barriers to exit, we examine three options for complementary public policy in the short-term: direct government intervention; a marketbased solution; or regulation. In the long-term, a redesign of the energy-only NEM market seems inevitable.
Link
Citation
Economic Analysis and Policy, v.46, p. 25-42
ISSN
0313-5926
Start page
25
End page
42

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