Wholesale Electricity Market – Western Australia
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Transcript of Wholesale Electricity Market – Western Australia
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Wholesale Electricity Market –
Western AustraliaAPEx Conference 2008 – Sydney
Allan Dawson13 October 2008
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The South West Interconnected System covers much of the populated portion of Western Australia Population just over 2
million Peak Demand approx. 3500
MW
Geographically isolated from other jurisdictions (not interconnected)
Strong summer peak demand
South West Interconnected System
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History
Aug 2001 to Oct 2002 – Consideration of market design options by Energy Reform Task Force
Nov 2002 – Government endorsement of recommendations Feb 2003 to Apr 2003 – Review of market design Aug 2003 to Sep 2004 – Industry develops market rules Oct 2004 – Market rules published Dec 2004 – IMO established 2005 – First reserve capacity cycle undertaken Apr 2006 – Disaggregation of Western Power Sep 2006 – Energy market commencement
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Western Power
• Verve Energy (Generation)
• Synergy (Retail)
• Western Power (Transmission & Distribution)
• Horizon Power (area outside of South West Interconnected System)
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Market Objectives
Promote economic, efficient, safe, reliable electricity in South West Interconnected System
Encourage competition between generators and retailers, including entry of new competitors
Avoid discrimination against particular energy options and technologies
Minimize long-term cost of electricity
Encourage energy efficiency
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Market Design Drivers
Small isolated system
Desire to reduce risk and encourage private investment
Significance of reliability objective to Government
Provide downward pressure on prices
Recognise current limited competitive tensions
Fairness for all technology and energy options
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Market Structure - Overview
Reserve Capacity Mechanism
Wholesale Electricity
Market
Energy Trading Services
IMO IMO System Mgmt
Bilateral Contracts Auction Bilateral
ContractsShort Term
Energy Market Balancing AncillaryServices
2 – 3 Years ahead Day Ahead Real Time
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High Level Comparison
Wholesale Electricity Market (WA)
• Reserve Capacity Mechanism
• Net Market
• Short Run Marginal Cost Based Market Caps (~$286/$763/MWh)
• Ex-Ante Market
• No Nodal Dispatch or Transmission Model
National Electricity Market (East)
• No Reserve Capacity Mechanism
• Gross Spot Market
• Market Based Spot Cap ($10,000/MWh)
• Real Time Market
• Nodal Dispatch with Complex Transmission Model
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Market Performance
• Small but growing – Load growth = 3.9 % p.a. over the next 10
years
– Registered generators = 22 (6 new since market start)
– Register retailers = 15 (5 new since market start)
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Impressive Investment
• 700 MW new generation – in service• 1100 MW new generation – under
construction• Renewable capacity doubled (125 MW to
250 MW)
• Funded entirely by the private sector!!
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Generation Market Share
Verve Energy Alinta Synergy Goldfields Power NewGen Griffin Power Perth Energy Other
2007/08 Reserve Capacity Year
2008/09 Reserve Capacity Year
Energy Market Commencement
2009/10 Reserve Capacity Year
2010/11 Reserve Capacity Year
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Fuel Diversity
• 45% gas fired • 15% dual (gas and oil) fired • 25% coal fired; and• 10% renewable
• BUT – single dependency on a one natural gas pipeline (1600 km)
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Price response
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Market Volumes
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Retail Market
• > 160 MWh per annum – Contestable (approx. 2,000 customers)
• 50 MWh to 160 MWh per annum – can chose a regulated tariff (approx. 15,000 customers)
• < 50 MWh per annum – non-contestable on a regulated tariff (approx. 960,000 customers)
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Retail Tariffs
• Last domestic price change – 1997/98 (10 years ago)
• Not reflective of costs!!!• Requires a State subsidy of A$790 Million over
the next 4 years (excluding transmission)• Proposal to increase by over 100%
> 70% generation costs > 30% transmission investment
• But - Change of government!
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Issues
• The current market an evolutionary step
– Too complex – particularly settlement – Not responsive to intra-day events – Balancing Market uncompetitive – Market design predicated on an
unconstrained grid
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Challenges
• Accommodating renewables
• Investment uncertainty
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Thank you