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What Is The State Of Australia's Energy Market?

Energy affordability is one of the nation's major challenges, as outlined in the Australian Energy Regulator's (AER) recently-published annual review.

As Australia transitions to a renewed energy market, consumers are bearing the brunt of a wholesale market crumbling under intense pressures.

The AER believes 2021-2022 was a year of vast changes and 'firsts' across the energy market.

These impacts were felt across Australia's east coast, where retail gas and electricity markets were stretched.

Clare Savage is the Chair of the AER, who said supply constraints, international pressures, and increased demand saw record high prices.

"Energy prices are pushing up in an environment where consumers already face higher costs of living."

"We've seen record wholesale energy prices in July, but network costs are also likely to increase as inflation and rising cost of capital impact the cost of network investments that will be needed to support an orderly decarbonisation of the energy system," she explained.

What Is The Report?

For more than a decade, the State of the Energy Market has shared a comprehensive view of Australia's east coast energy supplies and demand.

The report investigates wholesale electricity and gas markets, the transmission and distribution networks, energy retail markets, and consumer experience.

For the first time, the report incorporates the Energy Security Board's review on the Health of the National Electricity Market (NEM).

Together, the two reports present a full picture of the energy market as it is, and the challenges ahead.

"In these tough economic conditions, we are focused on using our regulatory levers to get the best possible outcomes for consumers to ensure the energy transition is delivered at least-cost," Ms Savage said.

Together, Australia’s energy consumption is strongly reliant on gas and electricity markets, which are interconnected.

In context, gas-powered electricity generation plays a significant temporary role, especially when consumers are dealing with increased prices.

Why Is It Important?

Australian households are bearing the brunt of higher energy and gas prices, as local supply runs thin and the conflict in Ukraine drives up demand.

However, the AER and NEM reports showcase the opportunities for Australian households.

For example, record volumes of rooftop solar capacity have been installed every year since 2015.

This reduces the volume of electricity that households need to buy from the grid.

Ms Savage said declining energy affordability is becoming increasingly concerning for consumers.

"We know that for various social, physical and mental reasons, many consumers experience periods of vulnerability that makes it more difficult to grapple with increasing energy bills," she said.

In addition, the AER continues to use its regulatory levers to protect consumers, and put a cap on the amount of revenue that businesses can collect from consumers.

How Can I Take Control Of My Overheads?

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Sally Writes 13 Oct 2022