Energy Security Board releases energy market redesign paper

esb, energy, transmission

The Energy Security Board (ESB), in collaboration with the Australian Energy Market Commission (AEMC), the Australian Energy Market Operator (AEMO) and the Australian Energy Regulator (AER), says it’s making the national electricity market “fit for purpose” with a plan to redesign the market.

ESB Independent Chair Dr Kerry Schott AO today released a consultation paper outlining a comprehensive redesign of Australia’s energy market with seven market development initiatives.

“These initiatives consider almost all aspects of how electricity is generated and dispatched, how consumers can access the services they want and how investment can occur in the most efficient way to avoid unnecessary costs,” Dr Schott said.

“It is clear that the rules and market frameworks need to evolve to keep up with the accelerating pace of change, which is leading to security and reliability challenges and less than ideal outcomes for consumers.

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The rapid and continued uptake of grid scale renewables and distributed energy resources has transformed our energy system:

  • Today solar PV is installed on more than 2.2 million households, up from 100,000 10 years ago
  • In last decade more than 10GW of grid-scale renewables connect to the NEM, 5GW in the last three years.

Dr Schott, said that reforms are critical to ensure the NEM is fit for purpose for the future and can accommodate new and different needs of the electricity system, market participants and consumers.

“The transformation roadmap released today is open for public review and response,” she said.

“Some changes can be implemented now and others before and after 2025. This major reform is a change journey to and beyond 2025–it is not a one ‘big bang’ reform process.

“We are working towards delivering the results of this consultation and recommendations to energy ministers at the end of this year. It’s a big agenda but the scale of the challenges mean it is imperative that this package be considered holistically. No reform will be left behind.”

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Energy Networks Australia welcomed the paper, stating the future energy sector will not be able to operate using current rules and frameworks.

“The ESB is taking a coordinated look at how the energy market would operate post-2025 when distributed energy resources and renewable generation will have disrupted traditional wholesale markets,” Energy Networks CEO Andrew Dillon said.

“Future markets will be built on a transmission superhighway with better connections between and across states, as well as local distribution grids that are fast becoming the platforms to allow greater participation from customers.”

Mr Dillon said smarter pricing signals would be important to ensuring higher levels of distributed energy resources could be integrated into the system while keeping costs as low as possible for all customers.

“Many significant reforms are contemplated in these documents and some – like pricing reforms – should proceed,” he said.

“However, it’s absolutely critical that realistic cost-benefit analyses are undertaken to ensure the reforms that go ahead – and that customers end up paying for – deliver real value.

“In recent times, we have seen examples where either the costs (five-minute settlement) or the benefits (metering competition) have not been good news for customers.

“Governments and regulators also have major roles to play. Avoiding unnecessary interventions and ensuring investible frameworks with reasonable returns are key to unlocking the many billions of dollars of private investment the sector needs over the coming decades.”

The Post-2025 Market Design Consultation Paper published today follows a request from the (former) COAG Energy Council to develop market reforms to support the transition of the National Electricity Market (NEM) and drive better consumer outcomes.

Stakeholders can provide feedback by October 19, 2020.

Final recommendations on all reforms will be made to Ministers by mid-2021.

Read the consultation paper here.