The JEC made a submission to the Initial Consultation of the independent NEM Wholesale Market Setting Review, convened by the federal Department of Climate Change, Energy, the Environment and Water.
We argue that the wholesale market design is not fit for purpose and should be replaced by a ‘flexibility’ market. A flexibility market sets out to value the things that add utility to consumers – dispatchability and rampability. We outline a simplistic, two-tier market that incentivises the addition of ‘flexible’ assets above ‘inflexible ones, while still allowing the latter to be invested in and participate in the market.
Additionally, in order to incentivise emission reduction, we propose adding a per MW benefit to zero-emission generation.
Finally, to manage very infrequent peaks caused by things like dunkelflautesand inopportune coal plant outages, we propose providing the market operator to control a reserve of storage, which it could use to manage the needs of the network, rather than to maximise owner profit. The owners of this reserve would be compensated for the opportunity cost and the costs socialised.
We strongly support the work of the review. The wholesale market design is not fit for purpose for use in the new energy system we are moving towards, and consumers are not best served by continual marginal adjustments to the design.
We look forward to continuing to contribute as the Review develops.
