According to a report by Frontier Economics the steep decline in wholesale electricity prices forecasts between 2018 and 2022 is because of the entry of 6,000 megawatts of renewable capacity that has been provided incentives by the present renewable energy target as reported by The Guardian.
The new reliability and emission reduction guarantees have been imposed on energy retailers and large energy users from 2020 will also result in further market concentration. The report noted that this change is specific in South Australia.
The report stated 3 options for market intervention by state participants in the national energy market that include:
- New restrictions where the parties in the national electricity market can own, control and operate new generation.
- Restrictions where the parties can be both a retailer, owner, control or operate generation.
- Restrictions on which parties can be retailers.
The report also states that the new reliability requirement will lead to a more competitive bidding from traditional fossil fuels like coal and gas, which in turn, will reduce prices if the guarantee is rolled out as compared with the business-as-usual scene.