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Bridging the gaps in energy market reform

When it comes to energy market reform, we’re building opposite ends of a bridge.

On one end, the Energy Security Board’s (ESB) post-2025 market design review is looking at what a long-term, fit-for-purpose market framework from the mid-2020s could look like. A wide-ranging review, this will no doubt consider new capacity mechanisms, new markets for grid services and new ways of building and operating the network. The ESB will release a paper discussing potential options at the end of the year.

On the other end, a number of reviews focusing on today’s challenges are also underway. These are looking to address complex market issues, seemingly by introducing a series of new acronyms such as COGATI, PFR and ALF.

The Australian Energy Market Commission’s (AEMC) coordination of generation and transmission investment (COGATI) is considering introducing transmission hedges, which will provide generators with financially firm access when constraints arise. The important hedge product design details are due to be released next week. Later next week, we are hosting a workshop with the AEMC focusing on what COGATI means for the renewables sector.

The Australian Energy Market Operator (AEMO) believes that frequency performance has declined to a point where mandatory primary frequency response (PFR) is needed. It proposes that all existing and new capable scheduled and semi-scheduled generating units provide PFR. The AEMC is consulting on this proposal, with submissions due by 31 October.

Average loss factor (ALF) is a new acronym that the clean energy industry is keen to introduce. The risks associated with marginal loss factors (MLFs) are well known, and ALF is our solution. The AEMC was expected to release a draft determination on this proposal at the end of September but has delayed this until 21 November in order to undertake further analysis. This delay recognises the impact that MLFs are having on industry so as to ensure the right policy position for industry.

Like any bridge, we’re hoping the two ends meet in the middle. Hopefully, the COAG Energy Council is conscious of this too when it meets on 22 November. Having not met since December last year, there will likely be a lot on its agenda. Unfortunately, a national energy and emissions policy is unlikely to be there.