The Council of Australian Governments (COAG) Energy Council has issued a consultation paper designed to inform the NEM’s transition to a two-sided market.
The consultation paper, here as a PDF, is designed to get input into the Energy Council’s two-sided market design proposal, due by the end of this year. This will eventually become part of the Energy Security Board’s (ESB’s) transition to the 2025 NEM market design. In a two-sided market, energy consumers get full visibility of wholesale pricing, to help them decide whether they’re buying from or selling to the grid.
A two-sided market design, the consultation paper notes, has to shield both consumers and the grid from risk.
“However, the transition also includes challenges for security and reliability as supply and demand becomes more variable and uncertain, and the industry transitions away from generation that traditionally delivered security services (such as inertia and voltage control). Any new market design needs to realise the benefits and mitigate the risks involved in the transition”, the paper notes.
Data is Key
Data is key to all this: the Energy Council explained in its media release (PDF) that information about solar panels, batteries, electric vehicles and smart devices is hidden “behind the meter”, and that makes it hard for AEMO to predict whether households can contribute enough kilowatt-hours so supply meets demand.
In the release, ESB chair Dr Kerry Schott says:
“A two-sided market will change all that because consumers and those who participate in the wholesale market on their behalf will be active in responding to price.”
If the data is real-time and transparent,
“the information itself becomes a tool to keep the power system operating securely and reliably and can fill gaps when the sun isn’t shining and the wind isn’t blowing.”
Making end-to-end data more available will also replace today’s complex information about retailers, generators, aggregators and users with:
“two simple categories – those who use electricity and those who sell it on behalf of end users”.
The discussion paper says a two-sided NEM would:
- Maximise participation by requiring that all entities trading energy in the wholesale market submit bids and be scheduled [including participating consumers – editor].
- Allow consumers to choose if and how they participate in the market or whether they operate through someone who does (for example through a retailer or aggregator). Technological advances and digitalisation mean that consumers will not need to monitor electricity prices, or actively participate if they choose not to.
- Require that the party best placed to provide forecasts of quantity and price to do so.
- Place obligations on functions and activities, rather than participant categories or technologies.
As noted earlier, the two-sided market would have just two kinds of entity – end users, and traders. The big changes to end users are that rather than being mere loads, as is traditional, end users are increasingly energy providers – and in today’s environment, most end users are providing energy to the system unmanaged and don’t have any response to market price signals.
The discussion paper says the interaction between end users and traders would happen at the connection point – where users are connected to the system, where metering occurs, and where the user-trader interaction is managed.
The paper describes three user-trader interactions at the connection point:
- The user can act as a trader – as well as describing a traditional generator bidding into the market, this could be a commercial user trading a service into the market, while also managing its trading arrangements with AEMO.
- The user buys services through a trader – akin to a standard retail arrangement in today’s market.
- Provide services through a trader – a solar power equipped homeowner selling energy into the wholesale market, with the trader managing their interface with the wholesale market. Traders might manage users on an individual or an aggregated basis.
New Services Would Support Innovation
The discussion paper also envisages a much broader range of services that can be traded on energy markets. Today, the two tradeable services are bulk energy (the wholesale spot market), and Frequency Control Ancillary Services.
The AEMO currently buys “public good” services (Network Support Control Ancillary Services, System Restart Ancillary Services, and emergency reserve services, such as the Reliability and Emergency Reserve Trader, RERT) on behalf of the market.
Inertial response and system strength should be tradeable
Yet other services – inertial response and system strength – don’t currently exist as tradeable services, because they’re considered as an inherent aspect of the supply fleet.
The discussion paper envisages a much more flexible energy market – one with room for innovation so that these and other services could become tradeable. The EC wants stakeholder input into how this might happen, what consumer protections would be needed in a more flexible market, and whether some services should not be tradeable.
To provide feedback and contribute to the discussion, simply email [email protected]
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“Chickens eventually come home to roost”!
And that’s a good thing – as long as they bring their own lunch box, water and tent with them, and keep to themselves.
If on the other hand they come home to roost with the intention of embroiling the homeowner into a creatively penned joint commercial performance contract, as an interested energy producing party, and with that (joint commercial performance responsibilities), in the overall scheme of things; well that’s another matter.
Commercial reality is oblivious to the tears from those who have failed to understand the pervasive attributes that always end up having ‘unintended consequences’.
And that is precisely why the often spruiked comment sprung from: “now who on earth could have possibly seen that coming?”.
Thank you for your contribution Richard.
Lawrence Coomber
The NEM wants to expose consumers to wholesale prices while DNSPs want to expose consumers to the costs of peak transmission. I have to point out this would be a lot easier to do if we hadn’t broken up the electricity sector into separate components focused on their own well being instead of the big picture, even when the trend is for that “big picture” to get hotter every year.
Since peak solar production is in the middle of the day it will bring wholesale prices down. As more solar is introduced the result could be near zero dollars for wholesale which means our rooftops would be supplying power to the grid for nothing. We would then pay peak prices when producing less than consumption and in peak hours Ike’s. We would be well and truly stuffed.
Thats already happening. In SA last November the average wholesale price from 10am-3pm across the entire month was negative.
Zero or negative daytime prices are likely to become a permanent feature of the SA grid by this time next year.
Yup, unconstrained compulsory price bidding with rejection of export of losing bids would tend to force the home rooftop selling price toward the cost of generation, i.e. next to nothing, when there is excess supply. That still leaves self consumption being profitable, as middleman costs will still keep supply prices up, and if network costs are high in hot weather due to all those airconditioners, then self generation is also peaking, providing immunity from such price peaks, if there’s enough roof space. The whole deal just needs to be compared to the cost of batteries and a petrol generator for half a week of dense overcast.
Me? I’m going off-grid once my slow owner-build is finished. An excess of batteries is cheaper than extending the power network out to the rural site.
Good solution for sure.
A 20-30 kW Off Grid Solution Erik – 1 Ph or 3 Ph?
Lawrence Coomber
Not having 3 Phase here in town, my lathe, milling machine, welder, etc. are single phase, so that will do off-grid, I figure.
For just one aging engineer, his modest workshop, and occasional visitors, even a 5 kW single phase inverter off as much array as it’s rated for could nearly scrape by, while an 8 kW inverter and proportionate array would give some margin for me. At least 20 kWh of batteries would be needed if the petrol generator is to be retired, and then visitors would need to be a bit disciplined at night and when overcast.
But before it goes up, I have to give some thought to EV charging, as my fossil ute is 20 years old. That variable alters the array and inverter requirements, if not the domestic battery size. Given that domestic EV chargers tend to be slow, I’m disinclined to use the EV for domestic energy storage. The EV must have useful range whenever needed, even if you’ve just run the toaster ragged.
Solar PV price per per watt is very economical now and with the STCs available for your Off Grid system up to a combined maximum (on plus off grid systems at the property) of 100 kW, you should strike while you can and install a good size system to deal with all of your requirements now and moving forward that you can reasonably predict (such as your EV charging for example).
Limiting your design idea to 5 kW Off Grid s a lost opportunity Erik in my experience in the Off Grid sector for many years, and you should rethink this point.
Good luck as you move forward.
Lawrence Coomber
The problem which needs a solution is a technical one of dispatch and would be best solved by a technical solution if such a solution is possible. Clearly, more storage would be a large part of such a solution.
I was “overwhelmed” by the marketing bullshit in the report. Marketing which inserts itself in the feedback loop of the supply and demand balance of our electricity supply. Its just too complicated to be efficient or effective and Its just more of what we have now.
Electricity industry goobledegook. This is a great example of what happens when some dick(s) turn a public utility into some sort of business that seems to exist to trade things that people don’t understand but have to pay for. Market forces are bullshit. Just follow the money trail to see who will profit from things like this and I’ll bet that it won’t be the consumer.
Spot on Ram!
Does this not make it more viable to run a interconnector from WA to the east coast. Oh that’s right its not cost effective and neither is a big cable to Singapore. Now what is the time difference from Singapore and Tasmania again