Australia’s energy market is rapidly changing, with increasing renewable generation, exiting thermal plants, and new technologies on the horizon, such as hydrogen.
Policymakers and regulators at the Federal and State levels are grappling with this transition. As a result, it may seem there are a bewildering number of regulatory changes and market developments.
Cornwall Insight Australia’s Energy Market Alert service can pierce through this noise, providing frequent, timely, and concise market updates for those that need to know.
When there are significant market developments, such as a rule change consultation, subscribers of our Energy Market Alert service will receive a concise report outlining the impact on the industry. This allows subscribers to spend more time responding to, planning for, and influencing these changes
Some key Alerts we have reviewed recently are below:
|Operational security mechanism||As baseload coal power stations depart the NEM, there will be a greater need for the strength and security services that these synchronous generators normally provide. To address this gap, the AEMC has published a directions paper on a future Operational Security Mechanism. This mechanism will provide a market signal for strength and security services (such as inertia) that will sit alongside the wholesale energy dispatch. Cornwall Insight Australia has released an Energy Market Alert on the directions paper. In our Alert, we review and analyse the impact on the market from this change, including shedding some light on the complex interaction between energy dispatch and this proposed mechanism.|
|Amending the administered price cap (APC)||The Administered Price Cap (APC) is the price that applies when the cumulative price threshold has been breached. The current APC was deemed a contributing factor to the NEM-wide market suspension in June. As a result, the APC will double from $300/MWh to $600/MWh, with the change effective from 1 December 2022 until 30 June 2025. This change should reduce the chance of future suspensions as it provides headroom for generators to account for current high energy input costs.|
Cornwall Insight Australia has released an Energy Market Alert on this change. In our Alert, we analyse the effects of raising the APC, exploring the impacts on the market, wholesale contracts and consumers.
|Transmission Planning and Investment Review (Stage 3)||Are speedier transmission approvals on the cards? That could be an outcome of the AEMC’s Transmission Planning and Investment Review.|
Major investment in transmission is needed in the NEM to deliver the energy transition. Yet the current regulatory approval framework for transmission investment was designed for a different time when the growth of the grid was incremental, and a major concern was overbuilding. The AEMC’s Transmission Planning and Investment Review seek to update the framework to address the energy transition needs, namely the investment required in the ‘step-change’ scenario of the Integrated System Plan.
Cornwall Insight Australia has released an Energy Market Alert on the Stage 3 draft report, reviewing the options proposed and providing an analysis of their potential implications for the market.
|Reliability Standards and Settings final report||Following our Alert on the draft, this Alert looks at the final report from the AEMC’s Reliability Standards and Settings Review. The Reliability Standard declares an acceptable level of capacity in the NEM to meet demand. The tools used to meet the standard are the Reliability settings, the market price cap, the cumulative price threshold, the administered price cap, and the market floor price.|
The final report makes recommendations for the three Reliability settings: Increasing the market price cap over time from the current $15,500/MWh to $21,500/MWh by 2027, Increasing the cumulative price threshold from 7.5 hours of the market price cap to 8.5 hours by 2027 (total value in 2027 is $2.193m) Increasing the administered price cap from $300/MWh to $500/MWh These new settings are likely to have a significant impact on the market.
Cornwall Insight Australia looks at the impact of these changes as well as backgrounding the rationale for these decisions.
|Gas and coal caps, interventions||On Friday, 9 December 2022, the Federal Government proposed interventions to address the high cost of domestic energy. The three main tenets of the proposals are: Temporarily capping the cost of gas to $12/GJ – this will apply to gas producers from December 2022 for 12 months. Applying a ‘reasonable pricing provision’ for gas sales after the cap has expired, and New South Wales and Queensland will (presumably) cap coal prices at $125/tonne. Cornwall Insight Australia has released a brief Energy Market Alert on the proposed interventions. In our Alert, we summarise the key initiatives and provide context for the upcoming battle over the ‘reasonable pricing provision’ that regulates gas pricing going forward.|
To request a copy of a recent Energy Market Alert: