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The COAG Energy Council has recently published AEMC advice on whether or not there are barriers in the market which may prevent the decommissioning of generation assets in the National Electricity Market (NEM).

The advice concludes that electricity businesses are coming and going in an orderly manner as the market provides signals around investment.

Over the last three years, the wholesale market has seen the entry of 2600MW of new generation, mainly renewables – along with 4600MW of generator exit, mainly coal.

Withdrawal from the market can happen in various ways including mothballing, dry storage, permanent retirement or decommissioning of part of a generation asset, or a whole-of-business decision to permanently exit the market.

Against this background, the COAG Energy Council has confirmed it is up to the market to provide signals for generation investment and disinvestment. In its meeting communique of December 2014 the council said it did “not support radical change to the market’s design, or assistance to generators leaving the market.”

At the same time the council asked the AEMC to provide information on the different options for exit; and explore the implications of outside factors which might impact market signals in the NEM and affect business uncertainty around exit costs.

The advice found nothing in the National Electricity Law or Rules which might constitute a barrier to the ability of business to make efficient de-investment decisions. It explored a range of uncertainties outside the market that could affect expectations about the future including direct and indirect costs, and a range of other factors including policy uncertainty particularly if policies have been changed on a regular basis.

 

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