EUAA Submission: NEM Wholesale Market Setting Review Initial Consultation
Emily Wood | February 14, 2025
‘…The EUAA supports the pursuit of net zero targets and a lower emissions stationary energy sector. As we transition from a highly centralised generation system dominated by dispatchable thermal generators to a highly decentralised system dominated by Variable Renewable Energy (VRE) a number of key challenges are becoming apparent that include:
• Traditional dispatchable fossil fuelled generators that to date have provided energy users with a bundle of services that were folded into the provision of energy including, energy (MWh), and system security (i.e. dispatchability, system strength, frequency and inertia) are exiting the market. This results in the unbundling of these services which now need to be provided (and priced) separately.
• While the provision of zero emission energy is of great value, VRE alone is not currently required (or able) to provide a number of these services vital to the reliable and efficient operation of the energy system. From an energy system perspective, 1MWh of energy from VRE is less valuable than 1MWh of energy from traditional sources. The supply of these unbundled services will come from a range of new and existing technologies that may require bespoke arrangements to deliver efficient outcomes for consumers.
• While batteries will play an important role in supporting intra-day capacity (i.e. 2hr to 4hr batteries) but are unlikely to play a role in economically managing inter-day challenges. Long-duration technologies that are capable of supporting system strength and reliability over an extended period of time will be required. Based on current technologies, this is likely to come from a combination of pumped hydro and gas fired generators.
• It appears that technologies that will deliver long-duration capacity will run infrequently with limited potential to generate revenue on a consistent basis. These random income events will be insufficient to underpin a successful business case meaning new market features will need to be added to the existing energy only market.
• We are also experiencing significant volatility in energy markets with negative spot prices in some jurisdictions becoming a regular occurrence, quickly followed by high spot prices in the days that follow. This adds additional risks for generators and retailers who are juggling a portfolio of assets and contracts. This risk, while in most cases can be hedged (noting that this is becoming more difficult in SA), is becoming more expensive, the cost of which is borne by consumers….’
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