The Australia Institute welcomes the opportunity to make this submission to the Special Review conducted by the Climate Change Authority (CCA) in conjunction with the Australian Energy Market Commission (AEMC).

The Australia Institute agrees with the AEMC that fundamental market reform is needed, and with the CCA that energy efficiency should be a priority. By making the energy market more flexible we can solve the ‘energy trilemma’: simultaneously lowering prices, increasing security and lowering emissions. Our three policy suggestions encourage producers and consumers of electricity to respond to periods of high demand, which will lower these peaks and therefore electricity prices overall:

• Five Minute Settlement would help major consumers reduce demand in response to price peaks. 
• Demand aggregation could facilitate ‘virtual power plants’ able to contribute to balancing supply and demand in a similar way to physical power plants. 
• Aggregated demand reduction rewards consumers for reducing their energy usage during periods of high demand.