DATAMONITOR VIEW 1
CATALYST 1
The Asia Pacific energy markets are currently undergoing rapid change, particularly with regard to liberalization and market structure. As such, a more detailed understanding of the current and future nature of these dynamics is required by market players 1
SUMMARY 1
ANALYSIS 2
Introduction: Datamonitor's MCI Index offers a robust framework for measuring the development of energy Market Competitive Intensity 2
The MCI Index shows how attractive a particular market is to new entrants in terms of the competitive environment 3
The MCI assessment draws on nine underlying metrics grouped into three broad clusters: market framework, supplier push, customer pull 3
The MCI Index measures the development of 20 diverse Asia Pacific gas and power markets 4
The MCI Index assesses markets in December 2007, and on July 1, 2010, in addition to driving a market switching forecast 4
Each of the nine pillars has an assessment scale to allow for the comparison of diverse markets (see appendix for more details) 5
Two differing overall MCI scores are calculated to ensure full clarity of results 5
A simple weighted average (additive) measure shows overall competitive intensity 5
A weighted multiple (multiplicative) measure shows overall competitive intensity 5
The MCI framework has a number of applications for your organization 6
Context: Competitive intensity remains strong in both the gas and power sectors 7
New South Wales's power market moves to second place in the forecast period 7
The New South Wales gas market moves one place up the gas rankings over the forecast period 8
Power MCI: New South Wales's power market score will increase strongly by 2010 9
Market framework scores will remain at the upper side of the metrics 9
Effectiveness of regulator [2007: 6/10 2010: 9/10] 9
NSW has multiple distribution networks, each of which is monopolized in a designated area of the state. Distribution networks are owned by EnergyAustralia, Integral Energy and Country Energy. NSW and Tasmania have common ownership in electricity distribution and retailing, with ring fencing arrangements for operational separation. 10
Effectiveness of balancing and data transfer [2007: 9.5/10 2010: 10/10] 10
Monopolistic competition in retail and the dominance of existing wholesale players is likely to continue 11
Wholesale market fragmentation [2007: 5.5/10 2010: 6/10] 11
Retail market fragmentation [2007: 4/10 2010: 5/10] 11
Traded market maturity [2007: 9/10 2010: 10/10] 11
Customer Pull scores remain low compared to Market Framework and Supplier Push scores 11
Access to market information and assistance [2007: 2/10 2010: 5/10] 11
Suppliers remain the only source for market information and assistance. However, once a centralized regulatory system is properly embedded, greater access to information and assistance can be expected. 11
Consumer representation [2007:8/10 2010: 9/10] 11
Propensity to switch [2007: 3/10 2010: 6/10] 12
Gas MCI: Strong Market Framework metrics offset weakness in the other scores 13
All the Market Framework metrics show improvement over the forecast period 13
Effectiveness of regulator [2007: 6/10 2010: 9/10] 13
Ease of third party access [2007: 9/10 2010: 10/10] 14
Control of gas transmission is privately held and operated. NSW is well connected to other states via two pipelines. Gas from the Cooper basin is supplied via Moomba-Sydney pipelines (MSP). This pipeline is operated by APA Group. Another pipeline, Longford-Sydney pipeline (Eastern gas pipeline), is run by Alinta. The entire distribution system is operated by Alinta in NSW. Its pipelines cover about 90% of the distribution service in the state. 14
Third party access is governed under a uniform national law, the National Third Party Access Code. This code provides right of access arrangements to natural gas pipelines on certain conditions applicable in each of the states and territories. 14
Effectiveness of balancing and data transfer [2007: 7/10 2010: 8/10] 14
Due to the connection to VicHub, balancing is well developed. The VicHub interconnector joins Duke Energy's Tasmanian gas pipeline and the mainland Eastern Gas pipeline to GasNet's pipeline system at Longford. This adds greater diversity to the gas supply in case of extreme demand and supply mismatch. 14
Highly concentrated wholesale and retail markets indicate weak Supplier Push 14
Wholesale market fragmentation [2007: 2/10 2010: 3/10] 14
NSW does not have any commercially viable reserves of natural gas. Gas utilized in the state is sourced from the Cooper basin in South Australia and from Victoria. Only a small amount of gas reserves are present in the form of coal steam methane (CSM). Conventional gas and CSM are both found in the Gunnedah Basin in northern NSW. Eastern star is developing this basin and also has exploration rights to both CSM and conventional gas in Moreton Basin. The wholesale market is highly concentrated leading to a low score. However, with the development of the CSM industry many new entrants are expected, which could potentially significantly reduce current concentration levels over time. 14
Retail market fragmentation [2007: 2/10 2010: 2.5/10] 14
NSW opened its retail market in 2002. It has 15 licensed retailers, of which eight are active in serving residential and small business demand. AGL is the main retailer and controls most of the supplies in the state. Other than AGL, Sun Gas Retail, Gas Country Energy and Origin Energy also have an active retail presence. New entrants in the retail sector include Australian Power and Gas, Energy Australia and TRUenergy. 14
Customer Pull Metrics remain modest over the forecast period 15
Access to Market Information and Assistance [2007: 4/10 2010: 6/10] 15
Consumer representation [2007: 2/10 2010: 7/10] 15
Propensity to switch [2007: 2/10 2010: 4/10] 15
Outlook: Near term opportunities in the power sector would appear to surpass those in the gas market 16
MCI Scores 17
APPENDIX 20
Definitions 20
Ask the analyst 28
LIST OF TABLES
Table 1: Market Competitive Intensity, New South Wales 2007-10 17
Table 2: MCI additive, Asia Pacific 2007-2010 18
Table 3: MCI multiplicative, Asia Pacific 2007-2010 19
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