renewable generation in the national electricity market, and … · 2013. 7. 30. · renewable...

Renewable generation in the National Electricity Market, and related environmental marketsIain MacGill, Research Coordinator, CEEMCIVL4815, University of Sydney Tuesday, 11 October 2005

Renewable generation in the NEM and related environmental markets

CEEM established …– to formalise growing interest + interactions between UNSW

researchers in Engineering, Commerce + Economics, Arts + Social Sciences, Science, AGSM, IES…

– through Research Centre undertaking research in interdisciplinary design, analysis + performance monitoring of energy + environmental markets, associated policy frameworks

– in areas ofPhysical energy markets (with an initial focus on ancillary services, spot market + network services for electricity + gas)Energy-related derivative markets (financial + environmental including interactions between derivative and physical markets)Policy frameworks and instruments in energy and environmentExperimental market platforms and AI ‘intelligent agent’ techniques to aid in market designEconomic valuation methodologies

– www.ceem.unsw.edu.au


Some dimensions of technological changeTechnology

‘hardware’ + ‘software’ + ‘orgware’

Technological innovation

Invention↓

Commercial-isation↓

Diffusion/adoption

Typical technological

change

(IIASA)


The need for innovation policyTechnological change is too important to leave to:– Imperfect markets: currently have severe climate externality

failings, generally under-deliver R&D, more systemic problems too..

– Technology ‘champions’: dangers of undue techno-optimismGovernment policy roles in:– Invention: support R&D into promising socially beneficial yet

unproven technologies– Commercialisation: support demonstration and initial

deployment of promising, technically proven, technologies

– Diffusion/Adoption: ensure markets reflect societal prefs


Federal Government technology assessmentNot clear what criteria applied, process by which established


Australia’s current innovation policyClimate change + energy initiatives White Paper, 2004– $500m low emissions technology demonstration fund– $100m renewable energy development initiative– $75m solar cities– $27m on low emission technology and abatement– $13m on local greenhouse action– $20m on advanced energy storage technologies for

electricity from intermittent sources– $14m to develop wind forecasting system– Improving grid accessibility– Continue with present MRET– No Emissions Trading or Carbon taxes


The market for demonstration funds…REDI Merit Criteria– management capability of the customer– commercial potential of the project– technical strength of the project and the

technical capability and resources available to the customer

– extent to which the project is likely to provide national benefits

– the need for funding– potential for greenhouse gas abatement.


Electricity Spot Market Derivatives Markets

Carbon markets…..Renewable Energy

Markets

2% target for retailers or $40/MWh penalty by 2010

For commercial renewables, potentially many markets…


Australia’s National Electricity MarketNEM covers all participating states:– A multi-region pool– Ancillary services, spot market & projections

NEM doesn’t formally include forward markets

– Operated by NEMMCO (owned by states)Compulsory participants in NEM:– All dispatchable generators & links > 30 MW– Network service providers & retailers– Contestable consumers may buy from NEM


Scope of the NEM

• Queensland• New South Wales & ACT• Victoria• South Australia• Tasmania (on connection

to the mainland)


Physical context for intermittent renewables - power system integration

Shared,distributed,time-varying,non-storableenergyFluxes(wind/wave/solar)

Independentlyowned generation

Sharedelectricitynetwork

&Powerstationsof other

types

End-useequipmentproviding

energyservices


Commercial context for intermittent renewables -power system integration in NEM

Renewablegenerators& other power stations(sellers)

National Electricity MarketCommercial activities:• Spot market• Derivative markets• Ancillary services markets• Network charges• REC market• Carbon markets?Subject to constraints:• Connection requirements• Security requirements• Regulatory requirements

Retailers&

largeend-users(buyers)


Installed capacity mix

(ESAA, Electricity Supply Australia, 2004)

0

2

4

6

8

10

12

14N

SW VIC

QLD SA W

A

TAS

NT

Sno

wy

Other renewableHydro (incl. Pump storage)OtherOilGasCoal


Equal consideration – National Electricity Code

Objectives – Market should be competitive– Customers should be able to choose with which supplier they

trade– Any person wishing to do so should be able to gain access to

the interconnected T&D network– A person wishing to enter the market should not be treated

more or less favourably than incumbents– A particular energy source or technology should not be

treated more or less favourably than another energy source or technology

However, hard to achieve in practice


The competition - generator costs in Australia

Estimated electricity costs of different generating options COAG (2002) Draft Energy Review Report


Gen. costs for baseload, intermediate + peak

(Origin, 2003)


Weekly avg. NEM spot prices since market inception (NECA, 05Q1 Stats, 2005)


Flat contract prices, Q1 2005(NECA, 05Q1 Statistics, 2005)


Economics: International elec. prices (industrial)

15.914.9

11.511.0

10.3 10.39.8 9.8 9.7 9.6 9.4 9.4 9.2 9.1 8.9

8.4 8.1 7.8 7.76.8 6.7 6.7 6.4 6.2

3.1

18.6

0

5

10

15

20

Japa

n

Italy

Sin

gapo

re

Net

herla

nds

Bel

gium

Por

tuga

l

Uni

ted

Kin

gdom

Irela

nd

Arg

entia

n

Cro

atia

Spa

in

Cze

ch R

epub

lic

Taiw

an

Kor

ea

Gre

ece

Fra

nce

Ger

man

y

Pol

and

Hun

gary

Luxe

mbo

urg

Uin

ted

Sta

tes

(NC

)

Cze

ch R

epub

lic

Can

ada

AU

STR

ALI

A

Fin

land

Sou

th A

frica

(ESAA, Electricity Supply Australia, 2004)


Prices for energy commodities (BP 2005)


Mandatory Renewable Energy Target


Present MRET is just about finishedThe Federal Govt. has rejected key review finding of a higher target to 2020BCSE estimates only approx. 700-800MW of new (post Jan04) projects required to meet existing target, and……project commitments > 500MW in 2004 leaves < 300MW new projects reqd


Some international renewable energy targets


Prediction of REC Prices (A$/MWH) (ORER, 2003)

0

510

15

2025

30

3540

45

5055

60

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

REC

pric

e

average price


NSW Scheme – a ‘designer’ carbon market

Liable parties

NSW Retailers obliged to acquit NGACs equiv. to NSW elec. mktshare X ‘excess’ NSW emissions

NGACproviders

Deliver certified emission reductions to create NGACs

NGA Certificate

tradingArrangements to be provided by

private enterprise

NGA Certificatesrepresenting 1MWh emission reductions from BAU

Certify Certificates Maintain register Ensure liable parties obligeScheme administrator (NSW IPART)

Create NGACS viaLow-emission generation (gas, new coal)

Demand Side Abatement

Sequestration


Current prices for NGACs (AMFA, 2005)

70.39$15.58$14.90Cal 09

70.28$14.49$13.92Cal 07

70.18$12.85$12.59Cal 05

70.14$12.59$12.21Spot

Number of Contributions ReceivedStd Dev of Mids (All)Mean All OffersMean all BidsTerm

NSW Greenhouse Gas Abatement Certificate (or equivalent)

Non-Quorate (<5 contributors) on SOME contracts.


Possible role of carbon tax / ETS


Many of our publications are available at www.ceem.unsw.edu.au

renewable generation in the national electricity market, and … · 2013. 7. 30. · renewable...

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