Electricity Industry Restructuring for Efficiency and Sustainability: Lessons from the Australian Experience

Hugh Outhred and Iain MacGill, University of New South Wales

Keywords

Abstract

To reduce climate change emissions, electricity industry restructuring must deliver outcomes such as:

Improved end-use efficiency, including building and equipment design
Greater use of low-emission generation, including renewable energy and co-generation
Greater use of actively managed energy storage facilities including some electrical loads
Reduced losses in the energy conversion chain

It must also maintain appropriate supply reliability and quality despite greater reliance on time-varying renewable energy fluxes and small-scale distributed resources. Moreover, the need to achieve economically efficient outcomes remains as strong as ever, while energy security concerns (both short and longer-term) are receiving growing attention.

To deliver such outcomes requires a sophisticated approach to electricity industry restructuring that coordinates centralized and decentralized decision-making by policy makers, regulators, system operations, supply and demand side industry participants, equipment manufacturers and building designers. It is particularly important to establish a framework that allows Energy Service Companies (ESCOs) to play a key role in facilitating improved end-use decision-making. Advanced metering and communication and flexibility in demand are important in this regard.

This paper discusses the strengths and weaknesses of the Australian approach to electricity industry restructuring with particular attention to the role of ESCOs. It assesses the wholesale and retail energy and ancillary service market designs, tradable environmental instruments, advanced metering strategy and regulatory and policy framework with respect to efficient energy use, stochastic renewable energy generation and cogeneration, and energy storage. It makes suggestions on how to enhance participation by end-users, ESCOs, building designers, and equipment manufacturers.