Renewable Energy Zones in Australia's National Electricity Market

Abstract

Australia's National Electricity Market operates in one of the world's longest and stringiest transmission networks. The 2016-2020 investment supercycle, in which 13,000 MW of renewables were committed, is slowly revealing the limits of network hosting capacity for renewable plant. In this article, side-effects arising from the supercycle are analysed. The majority sources of renewable investment failure relate to deteriorating system strength, viz. associated connection lags, remediation and curtailment costs. Although a multi-zonal market, the NEMs locational investment signals remain visibly strong. A change to nodal arrangements may refine dispatch efficiency but the bigger policy problem is rapidly diminishing network hosting capacity for new renewables, imperfect regulation and regulatory lag associated with augmentation. Markets participants seek to move faster than regulatory frameworks allow. Renewable Energy Zones (REZ) are examined through both i). a consumer-funded regulatory model and ii). a renewable generator-funded market model. A 'supersized concessional mezzanine' facility is presented as a critical element of REZ capital funding. It forms the means by which to optimise market-based REZ transmission augmentation and moderate sponsor risks of transient underutilisation.

Efficient Renewable Electricity Support: Designing an Incentive-compatible Support Scheme

“…Further entry is likely to exacerbate curtailment until reinforcement arrives. Simshauser (2021) gives graphic evidence that poor foresight of future constraints (in this case, taking the form of increasing transmission loss factors) can lead to inefficient location decisions and financially costly outcomes that will feed back into future RESS auction bids.…”

Contagions in interconnected power markets

“…Apergis et al (2020) showed that power prices could fluctuate immensely to levels much higher than the long-term price, implying that Australian power market participants must possess sound risk management when transacting in the market. Third, according to Simshauser (2021), the world's longest transmission network is the Australian power market.…”

“…Tasmania joined the NEM in May 2005, while the Snowy region was abolished as a separate region in July 2008. There have been many studies of the Australian NEM (Bateson and Swan, 1989;Swan, 1990;Kim, 1997;Brennan and Melanie, 1998;Worthington et al, 2005; Contagions in power markets Reedman et al, 2006;Higgs and Worthington, 2008;Becker et al, 2007;Higgs, 2009;Thomas et al, 2011;Apergis and Lau, 2015;Apergis et al 2017aApergis et al , b, 2020Mishra and Smyth, 2017;Bell et al, 2017;Handika and Khudri, 2018;Smith and Shively, 2018;Han et al, 2020;Yan and Tr€ uck, 2020;Simshauser, 2021). However, none has examined contagions in the Australian interconnected power markets.…”