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Australia’s vast geographic expanse and the distance between its most populous regions rule out interconnectivity coast to coast. Eastern and southern Australia’s market – the National Electricity Market (NEM) – is separate to the remote areas of Western Australia and Northern Territory. Western Australia has a stand-alone market arrangement known as the Wholesale Electricity Market (WEM) operating in the South-West Interconnected System (SWIS). Northern Territory, because of its relatively low population and remoteness, operates with independent power producers and remote generators. The installed capacity of Australia’s electricity generators comprises 44,900 MW in grid-connected capacity and a further 5200 MW in embedded and non-grid capacity. Electricity transmission and distribution comprises 865,200 circuit kilometres. There are more than 9.5 million electricity connections throughout the country. National Electricity Market The National Electricity Market (NEM) is a wholesale market through which generators and retailers trade electricity in eastern and southern Australia. There are six participating jurisdictions which are physically linked by transmission network interconnectors: Queensland, New South Wales, the Australian Capital Territory, Victoria, South Australia and Tasmania. The NEM has around 260 registered generators, six state-based transmission networks (linked by cross border interconnectors) and 13 major distribution networks that collectively supply electricity to end-use customers. In geographical span, the NEM is the largest interconnected power system in the world. It covers a distance of 4500 kilometres, from Cairns in north Queensland to Port Lincoln in South Australia and Hobart in Tasmania. The market has five regions - Queensland, Victoria, South Australia, New South Wales and Tasmania regions - that follow state boundaries. The former Snowy region (located in southern NSW) was abolished from 1 July 2008, with its generation assets incorporated into the NSW and Victorian regions. The NEM is a compulsory wholesale pool into which generators sell their electricity. The main customers are retailers, which buy electricity for resale to business and household customers. While it is also possible for an end-use customer to buy directly from the pool, few choose this option. The market has no physical location, but is a virtual pool in which supply bids are aggregated and dispatched to meet demand. The Australian Energy Regulator monitors the market to ensure that participants comply with the National Electricity Law and the National Electricity Rules. The pool, a central dispatch system, is managed by the National Electricity Market Management Company (NEMMCO). Wholesale trading in electricity is conducted as a spot market where supply and demand are instantaneously matched in real-time through a centrally-coordinated dispatch process. Generators offer to supply the market with specific amounts of electricity at particular prices. Offers are submitted every five minutes of every day. From all offers submitted, NEMMCO’s systems determine the generators required to produce electricity based on the principle of meeting prevailing demand in the most cost-efficient way. NEMMCO then dispatches these generators into production. A dispatch price is determined every five minutes, and six dispatch prices are averaged every half-hour to determine the spot price for each trading interval for each of the regions of the NEM. NEMMCO uses the spot price as the basis for the settlement of financial transactions for all energy traded in the NEM. The Rules set a maximum spot price of $10,000 per megawatt hour, which is the maximum price at which generators can bid into the market. A minimum spot price is also set at the rate of -$1000 per MWh. National Electricity Market report NEM report for the week ending: 18 October 2008
25 October 2008
1 November 2008
8 November 2008 The Australian Energy Regulator provides a market snapshot on its website. Outside the NEM Western Australia recently introduced a number of electricity market initiatives, including new wholesale market arrangements. Western Australia’s Wholesale Electricity Market is administered by the Independent Market Operator (IMO). In conjunction with the IMO, independent state regulator the Economic Regulation Authority is responsible for performing surveillance on the Wholesale Electricity Market (WEM) in the South West Interconnected System (SWIS) of Western Australia. This function is governed by three legislative instruments, the Electricity Industry Act 2004, Electricity Industry (Wholesale Electricity Market) Regulations 2004 and the Wholesale Electricity Market Rules. The Authority has a role in monitoring the Wholesale Electricity Market operations and conducting reviews to ensure the market is effectively meeting the Wholesale Market Objectives which are defined in the Wholesale Market Rules. Market structure: http://www.imowa.com.au/market_structure.htm The Northern Territory has introduced electricity reforms but at present there is no competition in generation or retail markets. The National Electricity Market in eastern and southern Australia is a gross pool in which all physical delivery of electricity is managed through the pool. In contrast, a net pool or voluntary pool allows generators to contract with market customers directly for the delivery of some electricity. Western Australia’s electricity market uses a net pool arrangement. A key feature of the market in Western Australia, and one that distinguishes it from the NEM, is the provision of a separate capacity mechanism.
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