NSW electricity roadmap needs further scrutiny

The NSW Government’s electricity roadmap is a significant reform which has the potential to detract from the national market framework and hinder its ability to deliver efficient outcomes for consumers.

The Australian Energy Council is concerned about the potential to undermine national integrated system planning and distort investment signals in the National Electricity Market (NEM), which could ultimately lead to higher costs.

The AEC’s Chief Executive, Sarah McNamara, said any government underwriting of specific generation projects has the potential to distort market signals for private generators by protecting new projects from low prices. The market is designed to intentionally put risks on investors rather than consumers.

“We understand the desire of the NSW Government to ensure reliability and manage energy costs - we share those concerns. But there are existing mechanisms in the NEM to encourage investment in new generation.

“There is already an effective reliability standard in place. The NSW-specific reliability target being imposed under this plan is excessive and along with the underwriting may lead to an over-build of energy assets in NSW. This would ultimately mean higher costs for households.

“Given the interconnectedness of the power system, energy reliability is best managed at a national level rather than state-by-state.

“It is unclear how this plan, which is designed to boost local NSW capacity, will impact the business case for proposed interconnectors, which are designed to share spare capacity between regions to keep energy costs down,” Ms McNamara said.

“It is imperative that consultative work is done to ensure this NSW Roadmap is consistent with the Energy Security Board’s critical work on the Post-2025 market design of the NEM, which is currently being finalised.  The industry looks forward to those consultations with the NSW Government.” 

About the Australian Energy Council

The Council represents 21 major electricity and downstream natural gas businesses operating in the competitive wholesale and retail energy markets. These businesses collectively generate the overwhelming majority of electricity in Australia, sell gas and electricity to over 10 million homes and businesses, and are major investors in renewable energy generation.