Although comprising under five per cent of the modern economy's GDP, energy has a far greater importance.  This has especially been the case for Australia where energy exports - coal and gas - account for over one fifth of the total.  

 

Australian industries and households, until the onset of climate change policies, enjoyed among the cheapest source of electricity and gas in the world.  On the back of this we saw the growth of energy intensive export oriented smelting and other industries. 

 

The imposition of regulatory costs designed to reduce emissions of carbon dioxide has dramatically reversed this former competitive advantage.

 

Electricity

Electricity underpins the modern economy.  Australia has low cost, low sulphur conveniently located coal resources. Once it adopted a commercial, competitive and mainly privatised supply system, it became amongst the cheapest electricity market in the world,

 

The adoption of greenhouse policies reversed this advantage.

 

Additionally, green campaigning against any new fossil fuel developments adds considerable costs. Further costs are progressively being introduced as a result of government regulation requiring electricity suppliers to operate in non-commercial ways eg. regarding disconnection for non-payment.

 

These issues aside, the nature of the market and its networks needs to be constantly reviewed in light of commercial and technological changes. 

 

Gas

Gas is a major part in the energy mix both directly and indirectly through the generation of electricity. Australia has vast reserves of "conventional" gas, in the main far removed from domestic markets.  There are also considerable resources of coal seam and shale gas.

 

Gas has benefitted for preferential treatment as an electricity supply source as a result of its lower carbon to energy content compared to coal.  This is being eliminated.  Gas faces two other issues: opposition to its development by green and some local interests and pressures on costs due supply preferences for domestic markets.  

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