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ONE of the biggest beneficiaries of the price on carbon, Hydro Tasmania, has dramatically scaled back its ambitions. This follows the federal government’s decision to pave the way for the local carbon market to be integrated with Europe’s, while cutting the floor price.

This has put it under greater pressure to carve out a large presence in the national electricity market as it seeks to expand beyond its home base.

The national electricity market is steadily moving towards a structure similar to banking, aviation and retail - a couple of dominant players and a rump of small operators fighting over the balance.

Last year, AGL bought the Loy Yang A power station and is a keen bidder for a big part of the New South Wales government’s generation assets that are up for sale. If it succeeds, this will leave energy retailing and generation dominated by Origin Energy, EnergyAustralia (the former TRUenergy) and AGL.
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Smaller groups such as Hydro Tasmania, which has about 5 per cent of the national electricity market, will be increasingly exposed to the market power of the bigger companies.

To protect its position, Hydro Tasmania bought retailer Momentum Energy a few years ago for more than $40 million. Other generators such as ERM are also pushing to expand sales.

Momentum generated revenue of more than $500 million in the year to June. This is expected to rise by as much as 50 per cent this financial year, as the company attempts to lift annual revenue to $1 billion by 2014-15.

Mainland sales already make up half of Hydro Tasmania’s revenue, helped by Momentum, as well as sales into the national market via the undersea Basslink cable.

The government’s carbon pricing decision put Hydro Tasmania in the strongest position of any generator nationally, giving it an immediate lift in wholesale prices while - unlike all other generators, barring Snowy Hydro - it does not have to pay a carbon tax.

Read more: http://www.smh.com.au/business/small-generators-in-power-struggle-20130222-2excs.html#ixzz2LqteYcoA