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A legal-economic framework of electricity markets: Assessing Australia’s transition

Csereklyei, Zsuzsanna and Kallies, Anne (2022): A legal-economic framework of electricity markets: Assessing Australia’s transition.

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Abstract

Recent years have seen a surge in renewable generation investment in many countries, displacing traditional fossil-fuel generation at scale. The continuation of this clean energy transition is however threatened by outdated electricity market frameworks, which were not designed for large amounts of intermittent, zero-marginal cost generation. Clean energy transitions have amplified existing problems of liberalized wholesale markets and introduced new ones, including but not limited to maintaining system resilience and reliability and ensuring adequate future investment levels. Addressing these challenges will be central to a successful transition and requires a detailed understanding of the dynamic processes between electricity system objectives, legal frameworks, and market economics. We develop an integrated legal-economic model of electricity market design under transition conditions. The model proposes preferred pathways to proactively address major changes in electricity system objectives and the discrepancies between these objectives and market outcomes demonstrated on the example of Australia.

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