aemcpage 1 choosing a new future john pierce chairman australian energy market commission world...
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AEMC PAGE 1
Choosing a New Future
John PierceChairman
AUSTRALIAN ENERGY MARKET COMMISSION
World Forum on Energy Regulation
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AEMC PAGE 2
The NEM
Design
• Gross pool, energy only market: all energy traded through the market
• 5 regional spot prices, set half hourly
• Secondary financial markets for risk hedging
Scale
• Total network length: 900,000kms
• Number of customers: 10million
• Energy: 200 terawatts per year
• East-coast only
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AEMC PAGE 3
The power system
Source: AER, 2011 State of the Energy Market
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AEMC PAGE 4
NEM Governance structure
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Relative hourly prices in the NEM 1999-2010
AEMC PAGE 5
Source: PricewaterhouseCoopers, Investigation of the efficient operation of price signals in the NEM, December 2011, p.7
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Average and peak spot price and demand in NSW across an average and peak demand day
AEMC PAGE 6
Source: AEMO half hourly price and demand data
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Physical and financial flows in the NEM
AEMC PAGE 7
AER, State of the energy market 2010
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Installed capacity by fuel source – 2000 to 2011
AEMCPAGE 8
Source: AEMO, 2011 Electricity Statement of Opportunities, p.2-6
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Wind penetration levels in international power systems
AEMC PAGE 9
Source: Jones, L, Strategies and decision support systems for integrating variable energy resources in control centres for reliable grid operations, US Department of Energy, p.xxii
(Australian systems highlighted in red)
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Wind generation and total South Australian demand from 20 Jan 2011 – 2 February 2011
AEMC PAGE 10
Source: AEMO, 2011 South Australian Supply and Demand Outlook, 2011, p.77
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Average and marginal emissions intensity, with and without a carbon price
AEMC PAGE 11
Source: AEMC, Impact of the enhanced renewable energy target on energy markets – Interim report, 25 November 2011
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REC prices and the broader policy environment
AEMC PAGE 12
Source: Investment Reference Group, A Report to the Commonwealth Minister for Resources and Energy, April 2011, p. 89
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Conclusion
• Australian energy consumers need to be supplied with a reliable, secure supply of electricity at an efficient price, in the face of challenges to the market such as the Clean Energy Future Package and the enhanced RET
• effective policy implementation requires an appreciation of how the markets operate - previous market interventions in Australia have had unintended consequences, resulting in the potential to affect overall efficiency
• Market frameworks and mechanisms must be designed to be resilient and have the ability to deliver high level policy objectives at the lowest overall cost
AEMC PAGE 13
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AEMC PAGE 14