Future Security of the National Electricity Market

by Energy Action | Feb 06, 2017
A review into the Future Security of the National Electricity Market, chaired by the Chief Scientist, Dr Alan Finkel AO, has recently been released. A wide-ranging public consultation process will now commence which will provide advice to governments on the potential for a coordinated national reform blueprint.

In October 2016, the Council of Australian Governments (COAG) Energy Council agreed to an independent review of security and reliability in the National Electricity Market (NEM).  The independent panel, chaired by Dr Finkel has now presented its Preliminary Report to COAG.

The Preliminary Report states that recent events, including South Australia’s volatile prices in July/August 2016 and the first state wide blackout since the NEM began, the failure of the Basslink in the first half of 2016 and the proposed March 2017 closure of Hazelwood, Australia’s most emissions-intensive power station, highlight the opportunities and risks associated with the transition currently underway in Australia’s electricity market.

A number of key observations were identified in the Preliminary Report:

- The security and reliability of our electricity supply is less assured than in the past.

- The rate of technological change is unprecedented and transforming the electricity sector.

- Consumer expectations are shifting rapidly and driving change by embracing new technologies, choosing ways to better manage their energy costs and helping to reduce emissions.

- Household energy bills rose on average almost 50 per cent (inflation adjusted) in the six years to 2014. Attention to the costs associated with each element of the NEM is required: distribution and transmission networks, wholesale electricity generation, and electricity retail.

- Inadequate supply and the high cost of natural gas are contributing to electricity price rises.

- Variable renewable electricity generators, such as wind and solar PV, can be effectively integrated into the system with work underway on implementing technical and market solutions to increase grid security and reliability.

The Preliminary Report does not contain findings or recommendations. Instead, it sets out observations and questions to guide a process of open consultations and asks key questions for the future of Australia’s energy system including:

- How do we ensure the NEM can take advantage of new technologies and business models?

- How do we ensure the NEM meets the needs of all consumers, including residential, large-scale industrial and vulnerable consumers?

- What role should the electricity sector play in meeting Australia’s emissions reduction targets?

- What are the barriers to investment in the electricity sector?

- What immediate actions can we take to reduce risks to grid security and reliability?

- Is there a role for technologies at consumers’ premises in improving energy security and reliability?

- How can we improve the supply of gas for electricity generation to contribute to reliability and security?

- How can we ensure that competitive retail markets are effective and consumers are paying no more than necessary for electricity?

- What are the optimal governance structures to support system security, the integration of energy and emissions reduction policy, and affordable electricity?

The Preliminary Report is available at http://www.environment.gov.au/energy/national-electricity-market-review. The Final Report will be presented to COAG by mid-2017.


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