The West Australian government has announced changes to the Wholesale Electricity Market (WEM), designed to reduce inefficiencies, remove excess capacity, and send strong price signals to participants.
Synergy is expecting major changes to the Reserve Capacity Mechanism and a planned reduction in fleet size of approximately 15 per cent of nameplate capacity. The state’s largest electricity generator and retailer of gas and electricity is currently engaged in a process to determine what plant closures will result in the best commercial and electricity system outcomes.
Energy Minister Mike Nahan said the changes, which would take effect from 2017-18 in the South West Interconnected System (SWIS), formed part of the government’s Electricity Market Review, aimed at keeping electricity prices as low as possible. The reforms include:
- transitional arrangements to reduce capacity payments to power stations and demand-side management (DSM) providers due to current levels of excess capacity
- the introduction of an ‘auction’ by 2021, at the latest, to achieve efficient levels of electricity capacity in the market
- updated requirements for DSM providers so that services are more readily able to be called upon, and therefore more effective to the market
- improved incentives to maintain power stations to ensure they are ready to supply electricity immediately, as required.
“Electricity supply costs have spiralled out of control in recent years and the way our electricity market was structured back in 2006 is largely to blame,” Dr Nahan said.
“Currently, there is more than 1000MW of surplus electricity (excess capacity) within the SWIS, which is enough to power up to 750,000 homes on a hot summer’s day.
“The reforms that will be implemented, together with significant reductions in costs of the electricity businesses over the coming years, will go to fixing the problem.
“In the interests of removing excess capacity, Synergy will also reduce its plant generation capacity by 380MW by October 1, 2018.”
The reforms are broadly supported by the electricity industry, however, Dr Nahan said he was disappointed about the “scaremongering campaign” launched by new lobby group, Western Australians for Lower Power Prices.