Carbon prices, institutions, technology and electricity generation firms in two Australian states

A relationship exists for the liberalised Australian electricity supply industry between institutional structures and technological change. The traditional institutional framework has been based on centralised generation and a regulated vertically integrated monopoly structure. This paper investigates the issues of institutional and technological change using the social cost perspective (including externalities), and focuses on the imperatives of greenhouse gas emission reductions.An Australian context has been chosen for the paper, in light of a proposed price on carbon; be that via an emission trading scheme or carbon tax. The power generation sector is dominated by coal- and gas-fired power plants due to the large reserves of coal and gas available in Australia. If carbon pricing of up to AU$40/tCO2 is introduced then the merit order for dispatch changes but coal-fired power generation sources remain an option.

Research highlights
► We examined two electricity generation regimes, one privatised and one corporatised.
► Under private costs a market-based model provides little change in technology.
► Under social costs both economic and political incentives for technological change.
► Climate change provides generators with economic incentives for technological change.
► Institutional and technology change are inter-related in moving to social cost.