Last week, the Energy Security Board (ESB) released its recommendations for the redesign of the National Electricity Market (NEM). Cornwall Insight Australia (CIA) was engaged by the ESB to assess the potential benefit of the proposed essential system service reform package for system strength provision.
The report detailed that these benefits arise both from more cost-effective investment and sharing of system strength assets, and more efficient use of the existing generation fleet that supplies this service at operational timeframe.
It also stated these reforms deliver a robust power system that can endure the transition to a low emissions system and harness the benefits that renewable energy has to offer.
George Wong, Senior Modelling Consultant at Cornwall Insight Australia, said:
“To date, system strength shortfall has caused ongoing connections delay and operational curtailment for renewable assets across the NEM. To enhance the provision of system strength in the NEM, the ESB has proposed to introduce reforms targeting both the investment and operational timeframes, including the Unit Commitment for Security (UCS), the System Security Mechanism (SSM) and TNSP system strength procurement mechanism reforms.
“Our current modelling found that the potential net benefit of the proposed reform package is approximately up to $1.2Bn in Net Present Value over the modelling period, which covers the period between financial years 2022/23 to 2039/40.”
The figure below (Figure 21 of the ESB Report Part B) shows the cost difference breakdown by year, over the modelling period for the upper bound scenario. Comparing capital expenditure (CAPEX) and operating cost (OPEX), we can see the resulted net benefits for the reform package.
Figure 1: Overall cost difference by year and expenditure type for upper bound scenario
More information on the report and recommendations can be found here: https://esb-post2025-market-design.aemc.gov.au/