“The evidence taken during this inquiry revealed that stakeholders are increasingly starting to consider whether the current system of networks, and the regulatory rules governing it, can be sustained. In the coming years, this arrangement may no longer effectively deal with how a significant amount of electricity is supplied,” the Senate’s interim report said.
“Given the concern that electricity networks are entering a ‘death spiral’, policymakers and regulators need to closely monitor developments in the electricity market to ensure network businesses do not discriminate against customers who seek to generate their own electricity.
“It is also important that the customers who continue to be supplied with electricity in the conventional manner, particularly customers who cannot afford to invest in their own electricity generation system, are not forced to pay an increasing share of network costs as a result of other customers going off-grid.”
The past year has revealed massive pitfalls in the energy sector’s ability to forecast demand, according to Murray-Leach.
GAS TO HEED ADVICE
“The story about electricity networks is a very useful lesson for gas networks. Theyneed to really invest time in thinking about what consumers are going to want gas for in the future and understand that we are not necessarily going to get it right. And so at the same time, it is also important for gas networks to manage around risk,” he says.
“Firstly, gas networks should be asking what a rise in gas prices is going to do. I’d say it would be conceivable that there won’t be a substantial drop in household gas demand in the short term.
“But networks need to really start looking at the new uses for gas in the future. One of the biggest new uses is clearly export. But in reality, a lot of the traditional uses for gas might slowly drop off.”
Forecasts around domestic gas prices in Australia are predominantly skewed upwards – pegged to reach $12 per gigajoule by 2018 before slowly easing, as the upstream industry looks towards an export future to meet demand in Asia and renewables are increasingly taken up by small-scale consumers.
Off the back of such a price increase, Murray-Leach says gas network providers must act quickly to install efficiencies that might help retain revenue streams amid an expected shrinking customer base.