Proposals for a comprehensive redesign of Australia’s energy market are set out in two new consultation papers.

The papers – Post-2025 Market Design Consultation Paper and Coordination of Generation and Transmission Investment – address future market arrangements and regulatory frameworks and the modelling of transmission access reform. These are necessary to facilitate the further integration of renewable energies at utility, business and residential levels.

The pace of this uptake is such that solar PV is installed on more than 2.2 million Australian households. This is up from 100,000 a decade ago. In those 10 years, more than 10GW of grid-scale renewables have been connected to the national energy market, half of that in the last three years.

Related articles:
Australia pilots smart EV charging across National Electricity Market
Australia: New model to unlock additional private investments in renewables and transmission
Local flexibility markets to account for over $10bn in global revenue

“The future energy sector will not be able to operate using current rules and frameworks; it is the time to think ahead for change,” said Andrew Dillon, CEO of Energy Networks Australia in a statement. Energy Networks Australia is the national industry body representing the country’s transmission and distribution networks.

Market design

The Post 2025 Market Design Paper from the Energy Security Board (ESB) sets out solutions to problems and opportunities identified in seven areas. These include the suitability of resource adequacy mechanisms and the current strategy to withdraw ageing thermal generation.

A range of system services that need to be defined to maintain a secure and resilient system is another issue. Such services include inertia, operating reserves and frequency control services.

Mechanisms are required to introduce greater visibility and certainty of resources on the system for scheduling and other ahead of real time purposes. Approaches under consideration include voluntary, financial ahead markets to procure and/or trade system services, possibly co-optimised with energy.

In order to enable customers to participate in energy markets, ‘two sided markets’ must be developed. These will enable consumers to choose if and how they participate in the market and to realise value from their resources. Effective integration of the distributed resources is required to maximise their value and the flexibility they can offer.

Lastly, arrangements are needed that can efficiently manage congestion on the transmission grid and get renewable power to consumers.

Transmission access

The Transmission Access Reform study from the Australian Energy Market Commission (AMEC) provides technical specifications and a cost-benefit analysis for the transmission access arrangements proposed in the ESB report.

Transmission access reform involves paying generators the actual value of supplying electricity from the location they are in, rather than a one-size-fits-all reference price for each region. When there is congestion in a part of the grid, the value would drop, returning to the reference price when congestion eases.

Modelling indicates the likely benefit to consumers between Au$6.2-8.2 billion (US$4.5-5.9 billion) from 2026 and 2040. The benefits would begin to accrue immediately, reaching Au$400-660 million in 2026, if the regime is implemented immediately.

“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,” added ENA’s Dillon.

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