The Australian Energy Market Commission (AEMC) has published an interim report for its review into the market and regulatory frameworks that support reliability in the national electricity market (NEM).

The interim report sets out the Commission’s initial views on:

  • The key concepts of dispatchability and flexibility
  • Forecasting and information processes needed to identify future gaps in electricity supplies
  • The role of the contract market in supporting reliability by guiding investment and operational decisions

The review also sets out the Commission’s preliminary analysis of Finkel Panel recommendations on the need for a strategic reserve; the suitability of day-ahead markets; and facilitating demand response in the wholesale market.

A reliable supply of energy means having an adequate amount of capacity (both generation and demand response) to meet consumer needs.

This means making appropriate operational decisions in the short term as well as having the right amount of investment over the long term.

Reliability in the NEM is underpinned by a market-based framework, where market signals guide efficient investment, retirement and operational decisions.

Market-based solutions incentivise innovation, competition and efficiency, leading to lower costs and prices for consumers.

The framework is supplemented by intervention mechanisms that can be used by the Australian Energy Market Operator when necessary, including the Reliability and Emergency Reserve Trader (RERT), a type of strategic reserve.

In the past decade the NEM has experienced high levels of reliability.

However, significant changes in the energy sector, leading to a tighter balance of supply and demand at peak times, mean that it is timely to assess the framework that underpins reliability.

A reliable supply of energy to consumers also requires a secure power system – one that is operating within defined technical limits – and reliable networks. This review does not address system security or network reliability as they are addressed through different frameworks. In particular, the Commission is considering system security issues through its System security work program.

Submissions are due by 6 February 2018.

The final report, including recommended actions, will be published in mid 2018 for consideration by the COAG Energy Council. 

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