National Electricity Market: Near-term optimisation

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National Electricity Market: Near-term optimisation

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EARLY STAGE PROPOSAL
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POTENTIAL INVESTMENT OPTIONS
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INVESTMENT READY PROPOSAL
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PROJECT DELIVERY
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POST COMPLETION REVIEW

National Electricity Market: Near-term optimisation

A graphic of the Australian continent. Qld, NSW, Vic, SA are shaded.
LOCATION
National
GEOGRAPHY
National
SECTOR
Energy
OUTCOME CATEGORY
Energy Transformation
PROPONENT
Infrastructure Australia identified proposal
OPPORTUNITY TIMEFRAME
Near term (0-5 years)
DATE ADDED
14 February 2019
Opportunity

The National Electricity Market (NEM) serves almost 90% of Australia’s population. It faces significant challenges as electricity generation shifts away from thermal electricity generation, towards a more diverse portfolio of fuels, such as wind and solar, backed up by dispatchable generation, such as pumped hydro. The power system is also adapting to changing patterns of consumer demand, predominately caused by the uptake of residential solar power.

This transition will need to be effectively managed to ensure the reliability, security and affordability of electricity for users.

In the near-term, there is an opportunity to optimise the NEM by increasing system connectivity, strength and transfer capacity.

Near term investments in supporting infrastructure, such as network capacity and systems services, will also create a more reliable and secure power system that can better withstand variable consumer demand and unplanned events.

The power system’s resilience and reliability can also be enhanced by increasing the capacity to transmit electricity across regions, increasing fuel diversity and geographic coverage.

In December 2021, the Australian Energy Market Operator (AEMO) released an update to its 2020 Integrated System Plan (ISP), which was first released in 2018 and formed part of the evidence base for this proposal. The next ISP will be finalised in June 2022.

Medium- to longer-term uncertainty of managing the transition to a more diverse portfolio of fuels is also included in the Infrastructure Priority List as an Early-Stage Proposal.

Early-stage Proposal

The 2021 ISP Update has identified three categories of transmission projects – Committed and anticipated, Actionable, and Future ISP projects. This proposal relates to the committed and anticipated projects that would improve interconnections between NEM regions, unlock renewable energy zones and make better use of existing assets. These are critical to address cost, security and reliability issues, and are underway, having already received their regulatory approval (or equivalent).

They include:

  • increasing transfer capacity between New South Wales and Queensland, Victoria and South Australia
  • transmission capacity to the Western Victoria and Central West Orana Renewable Energy Zones
Next Steps

The NEM is a wholesale market that connects generators and retailers across the six eastern and southern states and territories in Australia. Western Australia and the Northern Territory are not connected to the NEM.

The Australian Energy Market Commission (AEMC) develops the rules by which the market must operate.

The Australian Energy Regulator (AER) enforces the rules and makes judgements on the regulatory proposals of monopoly network operators.

As AEMO handles the day-to-day operations of the electricity and gas markets, we encourage them to continue to work with AEMC, AER, Energy Security Board, government and private sector asset owners and operators to identify options for near term optimisation of the NEM that considers transitional requirements to the Post-2025 market design.

 

Refer to Infrastructure Glossary for terms and definitions.