Small Energy Markets, Scattered Networks and Regulatory Reforms: The Australian Experience

The global experience with regulatory reforms that promote competition in small electricity markets, especially characterized by scattered networks serving low-density load, is limited. We contribute to this knowledge and policy gap by analyzing the reform experience and policy options in Australia’s Northern Territory (NT) market. This market underwent vertical separation and it is now regulated under the national regulatory framework. A virtual wholesale market was created as a stepping stone towards a fuller wholesale market. We find that the new regulatory reforms have improved wholesale market transparency and accountability. However, the anticipated prospect of lower energy prices to consumers will not materialize in the absence of effective regulation and more ambitious changes in the sector. More private participation in electricity generation and retail in the short-term and intra-regional market integration in the medium term may be appropriate policy options as the demand for electricity grows. Market integration can facilitate and not hinder the development of renewable energy. However, we conclude that reforms in smaller electricity markets such a NT should be geared towards meeting the environmental and decarbonization objectives from the early stages given the potential for tropical leadership in off-grid supply of renewable energy.