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The Australian Market Evolution
Dr Brian SpaldingChief Operating Officer
NEMMCO
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Australian Market - Overview
NEM design
Recent major reviews of NEM
Evolving Areas
Australian Markets
Two Australian Electricity Markets Western Australian Wholesale Market
– Operated by the IMO and covers South West Interconnected System– Market started in September 2006– Operates around physical bilateral contract positions– Includes a separate capacity market
National Electricity Market (NEM)– Operated by NEMMCO (also operates the power system)– Covers eastern coast of Australia– Includes more than 90% of Australia’s electrical energy– Market started in December 1998– Energy only, mandatory, 100% physical spot market– Market directly dispatches the power system (no physical contracts)– Financial contracts exist around the NEM
(This presentation focuses only on the NEM)3
NEM Statistics
Volume of Sent-out Energy (2007-08)
199,000 GWh
Value of Sent-out Energy (2007-08)
AU$10.2 billion (Physical Spot)
Maximum NEM Demand 34,425 MW
Installed Scheduled Generation40,700 MW
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NEMMCO’s Core Task
Power system security
Qua
lity
of S
uppl
y
Generation O
ffersOpe
rate
with
in li
mits
Power system reliability
Prescribed standards
The Task
To utilise the least “cost”
Generation while maintaining
the integrity of the
power system
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NEM – Physical Spot Market
Gross pool (compulsory) and energy only market
Generator offers to supply received each day with reoffers up to 5 minutes before real time
Generator production levels and dispatch prices set each 5 minutes as a result of a market optimisation
No physical delivery contracts at wholesale level as financial contracts between participants manage pool price risk
NEMMCO does not deal with financial contracts
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NEM - Market Design
Wholesale spot price determined at each of five regional reference points as average of 5 minute prices
Spot price determined as the “cost” to supply the next unit
Same spot price paid regardless of offer price – a common clearing price market
Market outcomes constrained to ensure physical power system remains secure
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SA
Tas
Vic
5 Regions
Participants lie within a Region
Generators Paid Regional Price
Customers Pay Regional Price
NSWG
GC CC
G
CG
NEM Regions
Qld
CG
Recent NEM Reviews
Reviews performed by the Australian Energy Market Commission
Reviews examine potential to improve the NEM design Congestion Management Review
– After reducing price regions from 6 to 5, congestion not material– More transparency in operation of transmission constraints– Clarify rights of generators who fund transmission developments
Comprehensive Reliability Review– NEM is reliable and confirmed standard (0.002% unserved)– Increase market price cap from $10,000 to $12,500/MWh– Routine Energy Adequacy Assessment
National Transmission Planning– National body to develop annual national plan out 20 years
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NEM Evolving Areas
Drought Energy limitations
Increasing wind generation forecasting Semi dispatch of wind
Smart Metering
Emissions Trading Scheme and renewable generation requirements
Integration of Gas and Electricity
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Australian Drought
Much of Australia is effected by drought Impacts both hydro power stations and most inland coal fired
power stations
NEMMCO performs assessments of likely energy supply shortfalls and generation loading profiles looking out 2 years
Allows generators, water authorities and government policy departments to plan water allocations
Moving to become a routine Energy Adequacy Assessment Process
Latest report projects energy shortages under low continued rainfall in Victoria and South Australia for summer 2009/10
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Increasing Wind generation
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South Australia 800MW operating1,900MW planned
Victoria 100MW operating2,000MW planned
Tasmania140MW operating320MW planned
NSW, QLD 30MW operating2,450MW planned
Project to accommodate increasing wind generation
Forecasting wind generation is essential to maintaining the accuracy of NEM dispatch and pricing processes
Project financed through Commonwealth Government
Forecast timeframes for dispatch (5 minutes ahead) out to 2 years ahead
Collection and analysis of information to support research
Australian Wind Energy Forecasting System (ANEMOS)
Inputs OutputHistoricaldata
Weather forecasts x 3
Real time measurements
(SCADA)
Forecasting models
Wind Generation forecasts
ANEMOS System
Terrain Information
5 minutes to 2 years
Semi Dispatch of Wind generation
From March 2009
Significant wind generation must be able to be semi-dispatched (output controlled downward)
Limit output of wind generation at times when it would otherwise violate network capability
Wind farms: Submit dispatch offers and plant availability
Compete with other scheduled generation on the basis of offers
Receive loading (dispatch) instructions from NEMMCO
Must comply with NEMMCO loading instructions
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Smart Metering
Several States and the Federal Goverments promoting the role out of “Smart meters”
Victoria has initiated a policy requirement
Federal Government has established a high level committee to progress
Cost benefit studies have very wide range of outcomes
NEMMCO requires metering data to settle retailers
Currently reading 565,000 interval meters (max 8 million)
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Emissions Trading Scheme
Federal Government keen to progress in July 2010 Plus 20% renewable by 2020 Yet to pass legislation
Impact on coal fired generation
Lead to changed dispatch merit order and shut down of highest polluting plant
Need to ensure that the rate of closure of coal is matched by investment in low CO2 plant
AEMC given task to review the framework of the NEM in the context of ETS and RET
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Australian Energy Market Operator (AEMO) to commence operations on 1 July 2009
Electricity and Gas market operation in single entity
Electricity System operation for all NEM and Gas System operation in Victoria
Looking at Gas and Electricity emergency operation
Gas and Electricity becoming integrated at both the supply and retail sectors
Integration of Gas and Electricity
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Australian Market - Overview
NEM designSpot market drives the power system operation
Recent major NEM reviewsCongestion, reliability, transmission planning – no major
design shifts
NEM EvolutionDrought, wind generation, smart metering, ETS,
integration of gas & electricity – similar to most markets
