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10 Oct 2019

Issue 37: Institutional Challenges Facing the NEM

The NEM is facing unprecedented challenges dealing with the influx of new technologies and there are few international precedents to draw on. So we face an existential question; are our governing institutions up to the task?

Issue 37: Institutional Challenges Facing the NEM

The NEM is facing unprecedented challenges dealing with the influx of new technologies and there are few international precedents to draw on. So we face an existential question; are our governing institutions up to the task?

In this article IES’s CEO, Hugh Bannister, takes a look at the challenges facing the institutions that are involved in managing or oversighting the NEM.  He argues that it’s time for the industry to open up and be more proactive in prototyping and trialling  new market concepts, including at the distribution end.  ARENA’s remit is currently too limited. The aim is for the industry to become more agile in practice as well as in word.  Failing that, the future NEM looks likely to be centrally controlled, highly regulated, inflexible and expensive.

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17 Jun 2019

Insider 36: The Strange Case of Snowy 2.0

In this article IES’s CEO, Hugh Bannister, uses NEO's premium curve chart to review and provide some insights into the evolution of NEM prices over the years. He then analyse Snowy 2.0’s place in the system.

Insider 36: The Strange Case of Snowy 2.0

IES’s NEO data visualisation tool has a special and extremely useful form of processing in its toolbox that generates what we call a premium curve.  Such curves can be displayed on a chart of NEM regional spot prices over some period such as a year, along with the fixed and variable costs of a range of supply technologies.  In this article IES’s CEO, Hugh Bannister, uses this chart to review and provide some insights into the evolution of NEM prices over the years.

Then, as an exercise, he attempts to use this tool to analyse Snowy 2.0’s place in the system.  However, Snowy 2.0 appears as an outlier when analysed from several angles.  It’s also very hard to reconcile its commercial operation with Angus Taylor’s target wholesale price target of $70/MWh unless that number is rather short term.  Under a premium curve analysis, Snowy 2.0 is a strange case indeed.

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26 Mar 2019

Insider 35: Why the Wholesale Demand Response Rule Change is Stuck and How to Unstick it

Since November 2018 the AEMC has been running a rule change process to deal with three proposals for, or relating to, a Wholesale Demand Response Mechanism.

Insider 35: Why the Wholesale Demand Response Rule Change is Stuck and How to Unstick it

Since November 2018 the AEMC has been running a rule change process to deal with three proposals for, or relating to, a Wholesale Demand Response Mechanism.  Such attempts, or related attempts to constraint existing demand response to be more controllable and visible, are one of the great perennials of the NEM.  Even prior to the NEM, we grappled with the same issue during the Victorian reforms from 1993. The most recent attempt to deal with the demand side was in 2016 when Snowy Hydro proposed a rule change that would have required price responsive load to be scheduled.  That went nowhere; according to the AEMC it wasn’t worth doing.

The latest attempt appears to be far more serious but has hit a road block.  According to reports from the March 2019 AEMC workshop on the topic, no-one knows how to measure demand response satisfactorily.  Also, and while hardly recognised as a problem right now, there currently seems to be passive acceptance that any approach needs a middle man to work, so demand responses can be aggregated and scheduled.  Such an approach will throttle demand response, just when the NEM needs as much as it can get.

In this brief article, IES CEO, Hugh Bannister, suggests a way to expose willing retail customers to short term spot price volatility while keeping risk to a manageable level.  He also outlines what needs to be done to allow retail customers to bypass the middle man, while ensuring that the system is not destabilised by errant short term behaviour.

These concepts need to be fleshed out in more detail.  They should then be considered as possible “more preferable” options to achieve the goals of the current rule changes.

IES presented to the AEMC on these topics on 20 March 2019.  The presentation can be downloaded here.

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31 Jan 2019

Insider 34: Can the NEM Survive More Renewables?

There remains a popular perception that a high level of renewables in the National Electricity Market (NEM) necessarily implies unreliability. In this article Hugh Bannister explores this notion by building up a plausible plant development strategy from the ground up; then trying to improve it.

Insider 34: Can the NEM Survive More Renewables?

There remains a popular perception that a high level of renewables in the National Electricity Market (NEM) necessarily implies unreliability.  In this article Hugh Bannister explores this notion by building up a plausible plant development strategy from the ground up; then trying to improve it.  The backbone of such a strategy is gas plant to provide reliability.  Renewable energy can then be used to lower operating costs, mainly fuel.

The article explores the limits to renewable energy penetration and what will be needed to relieve those limits, at least in part.

The article also touches on the issue of energy security.  The NEM is posing new challenges for AEMO to maintain security – the ability of the system to continue operating satisfactorily when disturbed.  While AEMO has a system security work program underway, the need to find robust long term solutions is becoming ever more urgent, as highlighted in the final report of the 25 August 2018 system incident.

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24 Oct 2018

Insider 33: The Failed NEM and How to Fix It

In this opiniated piece, IES CEO, Hugh Bannister, gives his perspective on how the National Electricity Market (NEM) got to be in such poor shape.

Insider 33: The Failed NEM and How to Fix It

In this opiniated piece, IES CEO, Hugh Bannister, gives his perspective on how the National Electricity Market (NEM) got to be in such poor shape.   Heavy handed government intervention is the evidence of that failure, but the article argues that it is persistent and wilful government failure in the administration and regulation of the NEM that has led inexorably to its current sorry state.

While popular debate rightly focusses on the renewable energy as posing a challenges for system security and reliability, the drivers for high retail prices are many and varied, and very little to do with renewables.  At the core, though, is a philosophy that has sought to profit from privatising the industry without putting in place arrangements that would ensure success from the consumer’s perspective.

 Hugh concludes the paper with a 9 Point Plan for recovery.  The details of what a recovery might look like require further discussion and debate.  This challenge will be taken up in future Insiders.

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23 Mar 2018

Insider 32: Understanding the Evolving NEM

This article describes how the IES electricity market forecasting tool, known as PROPHET, is used to model the National Electricity Market (NEM). PROPHET generates long term projections of wholesale electricity prices and dispatched generator outputs.

Insider 32: Understanding the Evolving NEM

This article describes how the IES electricity market forecasting tool, known as PROPHET, is used to model the National Electricity Market (NEM). PROPHET generates long term projections of wholesale electricity prices and dispatched generator outputs. Dispatch modelling can be used to investigate many uncertainties facing the NEM of the future, such as:

  • How will additional coal generator retirements impact wholesale prices?
  • To what extent will energy and pumped water storage participate in the evolving NEM?
  • How will the energy produced from photovoltaic (PV) sources impact the wholesale price in the middle of the day?
  • Will new transmission interconnectors lower wholesale prices?

Understanding the evolving NEM has never been more important for market participants, investors and policy makers.

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09 Mar 2018

Insider 31: Reducing Artificial Price Volatility in the NEM

In engineering, designing to reduce or eliminate discontinuities and resulting shocks is good practice, delivering more robust and reliable operation as well as greater efficiency.

Insider 31: Reducing Artificial Price Volatility in the NEM

In engineering, designing to reduce or eliminate discontinuities and resulting shocks is good practice, delivering more robust and reliable operation as well as greater efficiency.

In this article IES CEO, Hugh Bannister, argues that this ought to be a design goal for NEM market machinery.  He considers two elements of the NEM market machinery that could be improved for smoother operation and lower ancillary service costs.  The changes required are not large, and could be built into the re-design of systems for 5 minute settlement.

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03 Nov 2017

Insider 30: The National Energy Guarantee

In October the Federal Government announced the National Energy Guarantee (NEG) as a major reform of the National Electricity Market (NEM).

This edition of Insiders discusses these issues.

Insider 30: The National Energy Guarantee

In October the Federal Government announced the National Energy Guarantee (NEG) as a major reform of the National Electricity Market (NEM). 

The NEG could be the biggest intervention by government in the history of the NEM.

This edition of Insiders discusses these issues. 

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26 Jun 2017

Insider 29: Will Finkel Fix the NEM?

IES CEO, Hugh Bannister, takes a look at a key recommendation of the Finkel panel and a few critical things the panel did not address.

Insider 29: Will Finkel Fix the NEM?

The National Electricity Market is facing its greatest crisis since inception.  Everything seemed to be going swimmingly until a few years ago, when the cracks started showing.  In the last twelve months it has morphed into a full blown disaster.

So what went wrong?  Was this great enterprise to create markets out of monopolies destined to fail?  Is the NEM market design so rickety that it needs a complete re-design?  If so, what should it look like?  Or does it just need a cosmetic makeover, with a few additional layers of rules, regulations and oversight boards, which is how the Finkel report can be interpreted?

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