Submission to NEM Wholesale Market Settings Review draft report

The JEC made a submission to the NEM Wholesale Market Settings Review draft report.

We support the proposed maintenance of an energy only market, but argued that the panel’s division of energy services into bulk, shaping and firming could usefully be given expression beyond the design of the Electricity Services Entry Mechanism (ESEM) contract designs. The market price settings regime could also be redesigned to enable one narrow set of price limits for bulking services and a second wider set of price limits for other resources that provide shaping and firming – essentially those services requiring flexibility on the part of the provider. This would drive down energy costs for consumers and provide efficient investment signals concerning what resources the system and consumers need.

In addition, we argued for the use of an out of market reserve controlled by the market operator to be the primary mechanism to provide deep firming – dunkelflautes and kaltflautes. This would be cheaper way to provide the same reliability outcomes for consumers than an in market solution.

We also made the case for major changes to the treatment of demand response. At one end of the scale, we argued large industrial energy users, such as desalination plants and (at some point) hydrogen electrolysers, could contribute deep firming capacity to the system and so drive again down the cost of managing low probability, high impact events. At the other end, we argued the wholesale demand response mechanism (WDRM) should be extended to small customers and households, increasing choice for consumers and competition with retailers, and lowering energy prices overall by providing substantial relief to the market during periods of stress.