The Australian Energy Regulator today published its third State of the energy market report. The report provides a comprehensive overview of Australia's electricity and natural gas markets.
AER chairman Steve Edwell said the report comes at a time of considerable momentum in the energy sector.
"We have seen renewed growth in generation investment, mainly in gas and wind capacity in Queensland, New South Wales and South Australia. Network investment is also rising to meet the challenges of soaring peak demand, ageing assets and more rigorous licensing requirements to improve network security.
"There has been continued growth and diversification in the natural gas industry, with new transmission pipeline investment allowing Queensland coal seam gas to compete for the first time with gas produced in the Cooper and Victorian gas basins. We will also see the launch of new spot markets for gas in 2010. The markets, based initially in Sydney and Adelaide, will provide competitive price signals for the first time in these markets."
Mr Edwell also said an EnergyQuest essay commissioned for the State of the energy market report found that the development of east coast LNG projects may ease domestic gas prices during the lengthy ramp up of export capacity.
Mr Edwell said that alongside these developments come some challenges and concerns.
"Spot electricity prices fell in most regions this year. While this was a positive outcome, high prices in South Australia and Tasmania resulting from generator strategic bidding continue to cause concern."
Mr Edwell said the AER would continue to monitor and report on this issue. He added that while generation investment has recently picked up, there is continuing uncertainty over climate change policies, which could potentially delay generation investment needed for reliability purposes.
In the network sector, Mr Edwell said that rising investment and operating costs were placing upward pressure on retail energy prices. In NSW higher distribution charges are increasing average residential electricity bills by around 10 per cent.
"The impact on larger users is even greater."
Mr Edwell said electricity customers will expect network businesses to translate rising investment and operating costs into efficient reliability outcomes.
"Consumers will also expect better information on their energy use and wider product choice."
The State of the energy market is intended to meet the needs of a wide audience, including government, industry and the broader community. The report supplements the AER's extensive technical reporting on the energy sector.
The Australian Energy Regulator is Australia's independent national energy market regulator. It monitors and enforces compliance with the national legislation governing the electricity and natural gas industries and is the economic regulator of electricity and gas networks in eastern and southern Australia.
The State of the energy market report will be available on the AER website. A limited number of hard copies will also be available.