Energy markets and systems around the world are entering a period of fundamental change. Energy security remains a key concern for many countries, as does responding to climate change. Together, those concerns will drive innovation and technological advancement and shape the future direction of markets.
Global and national demand for energy will continue to grow, although rising prices and policies to reduce greenhouse gas emissions and encourage energy efficiency are expected to moderate the rate of growth.
Fossil fuels are projected to underpin our energy security for several decades. However, Australia’s energy base will become increasingly diverse with strong growth in clean energy technologies. By 2035 renewable energy could provide as much as 40% of our electricity needs. Changes can also be expected in transport fuels and engine technologies. Rising energy prices will sharpen the focus on demand management and on the efficiency of market and policy settings.
Key strategic policy and market challenges for Australia over the next decade include:
- continuing to attract sustained investment in Australia’s energy system in order to maintain secure and reliable energy supply and services for consumers
- successfully developing, adapting and deploying new technologies to support clean energy objectives and to provide more options in managing energy use and costs
- managing ongoing change and risk, including changing market dynamics introduced by new technologies, carbon pricing and growing links between national and international markets, as well as unforeseen shocks or natural events.
- minimising energy prices and related cost-of-living pressures through more efficient markets, policy and regulatory frameworks and greater energy productivity.
Energy systems will evolve further over coming decades in response to a growing demand for energy, the emergence of new technologies, changing energy and climate policy frameworks and the interaction of broader socioeconomic forces.
There is a very positive outlook for our energy future, although transforming to a clean energy economy and minimising energy price pressures remain threshold issues.
However, our long-term energy path is by no mean ‘locked in’ and cannot be guaranteed by simply mandating predetermined outcomes, which would almost certainly position Australia inflexibly in rapidly changing world. Successful energy policies will build on the inherent strength and efficiency of markets by providing clear and stable guidance, as well as effective and efficient regulation supported by well-targeted measures that address areas of identified market failure. This will provide Australia with a platform capable of rapid and efficient adjustment while meeting our energy goals at an affordable cost.
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