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Distributed Electricity Generation in Competitive Energy Markets: A Case Study in Australia

The electricity industry in Australia has recently undergone significant restructuring. Generation, transmission and distribution have been unbundled and placed under private or public corporate ownership. Industry restructuring, together with concerns about the environment, have resulted in a noticeable increase in distributed electricity generation, especially small-scale generation. This development has important ramifications for the electricity industry and the wider economy. This paper provides an empirical analysis of the recent growth in distributed electricity generation in Australia, and analyzes the factors driving this resurgence of interest. The paper also attempts to identify the underlying factors contributing to the development of distributed generation. Past and current distributed generation projects are classified according to which technical or institutional factor was dominant in the realization of each project. This enables us to identify changes over time in the rationale for distributed generation. A comparative analysis of the developments in the different Australian states provides additional insights into the roles played by factors such as geography, the availability of low-cost industrial by-products for fuel, and the introduction of competitive markets.

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Energy Specializations: Energy Modeling – Forecasting and Market Analysis; Electricity – Distributed Generation; Electricity – Markets and Prices

JEL Codes:
D4 -
L94 - Electric Utilities
D42 - Market Structure, Pricing, and Design: Monopoly

Keywords: Electricity, distributed generation, competition, Australia, deregulation

DOI: 10.5547/ISSN0195-6574-EJ-Vol18-NoSI-2

Published in Volume 18, Distributed Resources: Toward a New Paradigm of the Electricity Business of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.