The South Australian Government has announced plans to increase competition in the energy market and drive down costs for businesses and households.

Wind turbines.

Today’s announcement includes a tender to procure 75 per cent of the government’s long-term electricity needs, in an effort to attract a new competitor to the market.

An Emissions Intensity Scheme - which trades credits between energy companies - will be explored at a national level, with further modelling to be undertaken in the coming months.

In addition, the government will commit $24 million towards a project that incentivises companies to extract more gas and supply it to the local market.

Today’s measures will provide a medium-term response to the recent spike in South Australian electricity prices.

Last month, the Australian Energy Market Operator reported that the South Australia’s spot market volatility in July was caused by a cold snap in the weather, high gas prices resulting from constrained supply on the east coast, and a planned upgrade of the interconnector to Victoria.

Currently, South Australia draws around 40 per cent of its power from wind and solar sources.

Gas is seen as an important transitional form of energy because it works in tandem with renewables, providing base-load power to stabilise the system.

Stronger physical links into the rest of the National Energy Market will enable South Australia to increase its supply of wind and solar power and sell it into the national grid.

In the short-term the government will work to drive down spot prices by restarting the Pelican Point power station, and in the long-term by pursuing better interconnection as well as changes to the National Energy Market rules.

The government has allocated $500,000 in the 2016 State Budget towards a study into a new interconnector between South Australia and New South Wales.