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An Overview of the Australian National Electricity Market

An Overview of the Australian National Electricity Market. Brian Spalding Chief Operating Officer. NEMMCO – Overview of Operations . Framework of NEM Market Operation Power System Operation Successes and Issues. The Framework. Australia’s National Electricity Market

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An Overview of the Australian National Electricity Market

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  1. An Overview of the Australian National Electricity Market Brian Spalding Chief Operating Officer

  2. NEMMCO – Overview of Operations • Framework of NEM • Market Operation • Power System Operation • Successes and Issues

  3. The Framework

  4. Australia’s National Electricity Market covers the Eastern and Southern interconnected electricity system Scale 0 1,000km

  5. NEM – The Parties in the NEM • 6 State jurisdictions • 100 Registered Participants • 5 main Transmission companies • 15 main Retailers • 20 main Generating companies - 260 generating systems totalling 36,700MW • Approx. 7.7 million customers • Maximum Demand 32,000MW and 190TWh

  6. NEMMCO – Market Operator and System Manager • NEMMCO the only Market and System Operator • NEMMCO • Operates, determines prices and settles the physical spot market • Responsible for power system integrity • Co-ordinates inter-regional transmission planning

  7. Market Market processes determine generators’ loading targets and prices each 5 minutes.

  8. Power system security The Task To maximise the value of trade in electricity while managing the power system Operate within limits Generation Offers Quality of Supply Prescribed standards Power system reliability NEMMCO’s Core Task

  9. Wholesale Market Structure G G G Generators G Generating Company Pool Market Customers (Retailers) R R Wholesale Customer End Users

  10. NEM – The Pool • Gross pool (Compulsory) • Generator production levels set each 5 minutes • 30 minute trading interval price in each of 6 regions • Annual settlement transactions about A$7B (US$5B) • No physical delivery contracts as Financial instruments between participants manage pool price risk

  11. NEM Regions • 6 Regions • Participants lie within a Region • Generators Paid Regional Price • Customers Pay Regional Price Qld C G NSW G SA Vic Snowy G C C C G G Tas C G

  12. Generator – NEMMCO – Retailer Relationships Physical Electricity Flows Dispatch Instructions Offers Generators Retailers Information Information Settlement Payments Settlement Payments Financial Contract Payments (hedges)

  13. Prices determined each 5 minutes

  14. Wholesale Prices

  15. Power System Operation NEMMCO maintains a secure power system, NEMMCO facilitates a reliable power system, by informing, constraining power flows, acquiring services or, if necessary, directing the market.

  16. Dispatch and Power System Security NEMMCO Forecast consumption Dispatch Optimisation Data Offers Transmission Coys Generators

  17. Dispatch and Power System Security NEMMCO Forecast consumption Dispatch Optimisation Constrain to System capability Data Technical limits Offers Transmission Coys Generators

  18. Dispatch and Power System Security NEMMCO Forecast consumption Dispatch Optimisation Constrain to System capability Check integrity Override process Data Technical limits Offers Transmission Coys Generators

  19. Dispatch and Power System Security NEMMCO Forecast consumption Prices to Market Dispatch Optimisation Constrain to System capability Check integrity Override process Dispatch Loading levels Data Technical limits Offers Transmission Coys Generators

  20. Successes

  21. NEM - Successes • Stable operation since 1998 • Efficient average wholesale prices and real reductions in most retail prices • High generation availability • Generation investment maintains reliable supply with few interventions • Very active retail transfers (25% pa in Victoria) • No financial failures of Retailers or Generators

  22. Issues

  23. Issues • Power system security • Accommodation of large scale Wind Generation • Generator technical performance and compliance • Incidence of multiple contingency events • Setting appropriate reserve standards • Industry Structure • Vertical integration • Horizontal integration • Ownership (Government v’s Private) • Prudential • Risks of failure • Availability of credit support • Interest in netting off spot and contract transactions

  24. Issues • Market Mechanisms • Lack of demand side response • Transparency and short term liquidity in Financial markets • Transmission • Planning and operation as a National Grid • Incentives on Transmission companies • Data and Process • Data volumes with increasing interval meters • B2B transactions

  25. NEMMCO – Overview of Operations • Framework of NEM – a competitive national approach • Market Operation – which drives the power system operation • Power System Operation – ensuring a secure and reliable system • Successes and Issues – opportunities for further efficiencies

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