Question

What market structure best describe the electricity retail market in South Australia? Please include the number and size distribution of firms, Concentration Ratio (CR3, CR4, CR5), the barriers to entry and exit and the degree of product differentiation in your discussion.

Answer 1

South Australia's market structure is fragmented but it is sold only through national electrical market which is an independent energy market operator. With regards to the electricity providers there are many, it is a combination of renewable and nonrenewable energy sources. There are 6 major providers and the size distribution of firms is concentrated between these 6. Concentration ratio has declined with the emergence of private companies, but it is CR3 as the main three companies cater to 70% of the market. The barriers to entry are that several key players are present in the market which makes new players difficult to enter the market. The plans have also become flexible thereby customers are opting for current players in the market, energy in South Australia is termed to be expensive, even though there are several uranium resources. It makes it difficult to exit when they setup all the equipment. In addition renewable energy sources such as wind and solar are aplenty and firms are trying to differentiate as government has also initiated several schemes.