An Overview of the Australian National Electricity Market

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
Australias 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
NEMMCOs Core Task
9
Wholesale Market Structure
Generators
G
G
G
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 A7B (US5B)
• 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 vs 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