Grid renationalisation - a discussion paper

Abstract

Electricity reform in Australia has been a comprehensive failure since the creation of the National Electricity Market (NEM) in the 1990s. None of the objectives of lower prices, greater system reliability or environmental sustainability have been met. The core aim of policy should be a genuine National Electricity Grid, driven by the goal of providing secure, affordable electricity to Australian households and businesses while reducing and ultimately eliminating emissions of carbon dioxide (CO2). The current NEM is not designed for this purpose and cannot achieve it. Rather, it is the product of a late 20th century ideological project, in which it was hoped that market incentives could outperform rational system design and management in the electricity supply industry. Nearly 20 years of unsatisfactory experience has proved that this is not the case, even for a traditional system based on coal-fired generation. Until relatively recently, most attention has been paid to the dramatic increases in the cost of electricity, driven primarily by the increased rate of return required for commercial investments in distribution networks, as compared to the former statutory authority model. However, recent failures of the transmission network in South Australia, Victoria and Tasmania have focused attention on the inadequacy of the national grid itself, and the fragmentation of responsibility between the electricity generators, owners of state transmission networks and interconnectors and multiple regulators. The appropriate policy solution is a unified, publicly owned, National Grid encompassing the ownership of physical transmission networks in each state and interconnectors between states, and responsibility for maintaining security of supply and planning the transition to a sustainable, zero emissions electricity supply industry. There is a strong case for extending the role of public ownership to include renationalisation of electricity distribution in addition to transmission, and for public investment in renewable energy.