EN E RGY NE TWORKS
HEALTH OF THE NEM: TRIAGING A CRITICAL ELECTRICITY SYSTEM by Imogen Hartmann, Journalist, Utility magazine
At the beginning of 2021, the Energy Security Board (ESB) handed down its 2020 Health of the National Electricity Market (NEM) report, the fourth annual report measuring the health of the NEM against six strategic energy objectives. With increasing renewable generation simultaneously improving emissions reduction and threatening security, plus an imminent technology boom underpinned by a competitive market – there’s a lot to cover. Here, we break down the report, and examine the areas of reform needed to address the major challenges facing the NEM.
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ividing energy needs into two categories of ‘reliability’ and ‘security’, the report finds contrasting results. While real progress has been made in terms of reliability through improved generation capacity, emission reduction, competition and network investment, security needs to be shored up through system stability and investor confidence. Many reforms are still urgent through the Post 2025 market design directions paper, which was also released on 5 January 2021. The Post 2025 report was developed in consultation with industry and governments, consolidating proposed reforms to address the challenges laid out in both the Health of the NEM assessment report and a Consultation Paper (issued September 2020). Building on the recommendations in the 2017 Finkel Review, the former COAG Energy Council established a Strategic Energy Plan for the NEM for the transition from large-scale thermal generation (predominantly coal-fired) towards large- and small-scale renewable generation, (mainly wind and solar). Six strategic objectives were used to measure the health of the NEM:
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UTILITY • MAY 2021
1. Affordability and satisfied customers As the COVID-19 pandemic took hold of Australia, financial pressures increased for residential and business consumers alike. The Australian Energy Regulator (AER) was forced to take steps to address the rising proportion of customers in debt, and provide support for those that were unable to pay bills. Despite falling wholesale and retail prices however, affordability still remains a critical issue for some customers. The affordability outlook is generally positive, with retail prices dropping and an end to the pandemic on the horizon, however, there is a risk of higher consumer prices thanks to the investment required in transmission and dispatchable generation to integrate more renewables. Although consumer satisfaction is on the rise, it still lags in comparison to other essential services industries. The report indicates communication with customers as a priority as relationships with retailers and other service providers grow. Additional smart meter installations and energy management systems, as well as the post 2025 market design work on distributed energy resources (DER) and two-sided markets have also been identified as opportunities for consumers to gain value. WWW.UTILITYMAGAZINE.COM.AU
