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Wholesale Electricity Market – Western Australia

Wholesale Electricity Market – Western Australia. APEx Conference 2008 – Sydney . Allan Dawson 13 October 2008. South West Interconnected System. The South West Interconnected System covers much of the populated portion of Western Australia Population just over 2 million

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Wholesale Electricity Market – Western Australia

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  1. Wholesale Electricity Market – Western Australia APEx Conference 2008 – Sydney Allan Dawson 13 October 2008

  2. South West Interconnected System • 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

  3. 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

  4. Western Power • Verve Energy (Generation) • Synergy (Retail) • Western Power (Transmission & Distribution) • Horizon Power (area outside of South West Interconnected System)

  5. 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

  6. 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

  7. Wholesale Electricity Market 2 – 3 Years ahead Day Ahead Real Time Reserve Capacity Mechanism Energy Trading Services IMO IMO System Mgmt Bilateral Contracts Auction Bilateral Contracts Short Term Energy Market Balancing Ancillary Services Market Structure - Overview

  8. High Level Comparison • 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 • 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

  9. 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)

  10. 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!!

  11. Generation Market Share

  12. 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)

  13. Price response

  14. Market Volumes

  15. 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)

  16. 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!

  17. 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

  18. Challenges • Accommodating renewables • Investment uncertainty

  19. Thank you

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