WA Power and Gas Conference

Wednesday, 16 March 2016

Richard Harris, Director, WestGen and Chairman WA Independent Power Association

Future proofing the WA electricity market

Introduction

• Markets and reform

• Networks

• Customer power and new business models

• Renewables and innovation

Benefits of a competitive electricity

market

• Markets better manage risk, capital efficiency and customer needs

• There is no good reason why governments should own generation

• Retail competition keeps pressure on prices and improves services

to customers

• Electricity networks may be better off in private sector

• Government ownership of assets and market entities conflicts with

policy role

• Open and competitive electricity markets are now the norm for

delivering power to consumers and they work

• Well designed, open markets provide the best means to future proof

electricity systems – no matter what new technologies come along

WA electricity market reform Mark2

• Capacity and energy market model preserved

• National market operator – AEMO

• System Management > AEMO

• Market governance/rule change reforms

• National Energy Regulator for networks

• Reserve Capacity Mechanism changes

• Constrained grid access

• Retail competition – FRC?

Still work to be done

• Government ownership vs policy maker

• Industry structure: dominance of Synergy

• Barriers to entry for new market players: retail

• Barriers to entry for new generation, especially

renewables

• Retiring old plant

• Ownership/future direction of networks

Network reform

• Constrained grid access and NER a good start

• Policy issues for transition – grandfathering access and rightsto capacity?

• Challenges of decentralised power models and newtechnologies

• Ownership/direction considerations – natural monopoly orbypass

• Risk and reward

• Owner should want to maximise use and offer new services tomeet the market needs

Customer power and new business models

• It’s a confusing world: customers are now generators

• And they will soon be storage owners

• Customers can switch on and off to suit their power needs

• What is the service offering to a customer?

• What is the new shape of the energy company vehicle – is the “gentailer”

model appropriate for the future?

• Or is it the “Uber” model?

Renewables and innovation

• Renewable Energy Target – not a lot of action, may need

extending beyond 2020

• Small scale/large scale

• Distributed/centralised

• Storage – smoothing intermittency and meeting peak

• DSM – empowering larger customers

• Price is a big driver, but also flexibility – especially with solar

• We’ve had technological innovation, we need financial

innovation

Observations

• Electricity reform in WA has come a long way since the 1990s

• Still a way to go, especially moving from government controlled to market

based solutions

• Market design should encourage investment and innovation – getting there

but need to understand how large projects are financed

• Predicting future technologies is like picking winners, not a good policy, the

key is getting the market design and industry structure right

• IPA has consistently supported competition and private sector investment in

energy assets as the best way of delivering electricity services to customers

Thank You

richard.harris@westgen.com.au

rharris@waipa.com.au