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APEX 2008 - S1P1 Allan Dawson

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					Wholesale Electricity Market –
     Western Australia
   APEx Conference 2008 – Sydney

                   Allan Dawson
                   13 October 2008
                 South West Interconnected System

 The South West Interconnected
  System covers much of the
  populated portion of Western
  Australia
    Population just over 2
     million
    Peak Demand approx. 3500
     MW

 Geographically isolated from
  other jurisdictions (not
  interconnected)

 Strong summer peak demand
                                                      History

 Aug 2001 to Oct 2002 – Consideration of market design options
  by Energy Reform Task Force
 Nov 2002 – Government endorsement of recommendations
 Feb 2003 to Apr 2003 – Review of market design
 Aug 2003 to Sep 2004 – Industry develops market rules
 Oct 2004 – Market rules published
 Dec 2004 – IMO established
 2005 – First reserve capacity cycle undertaken
 Apr 2006 – Disaggregation of Western Power
 Sep 2006 – Energy market commencement
                              Western Power


• Verve Energy (Generation)

• Synergy (Retail)

• Western Power (Transmission &
  Distribution)

• Horizon Power (area outside of South
  West Interconnected System)
                                           Market Objectives

 Promote economic, efficient, safe, reliable electricity in
  South West Interconnected System

 Encourage competition between generators and retailers,
  including entry of new competitors

 Avoid discrimination against particular energy options
  and technologies

 Minimize long-term cost of electricity

 Encourage energy efficiency
                                Market Design Drivers

 Small isolated system

 Desire to reduce risk and encourage private
  investment

 Significance of reliability objective to Government

 Provide downward pressure on prices

 Recognise current limited competitive tensions

 Fairness for all technology and energy options
                            Market Structure - Overview


                                Wholesale
                            Electricity Market

   2 – 3 Years ahead                Day Ahead                    Real Time

Reserve Capacity
                              Energy Trading                   Services
   Mechanism

                                                                  System
            IMO                         IMO
                                                                   Mgmt




Bilateral                   Bilateral      Short Term                      Ancillary
                  Auction                                 Balancing
Contracts                   Contracts     Energy Market                    Services
                                      High Level Comparison

 Wholesale Electricity Market        National Electricity Market
  (WA)                                 (East)

   • Reserve Capacity                   • No Reserve Capacity
     Mechanism                             Mechanism

   • Net Market                         • Gross Spot Market
   • Short Run Marginal Cost Based      • Market Based Spot Cap
     Market Caps (~$286/$763/MWh)          ($10,000/MWh)

   • Ex-Ante Market                     • Real Time Market
   • No Nodal Dispatch or               • Nodal Dispatch with Complex
     Transmission Model                    Transmission Model
                             Market Performance


• Small but growing
  – Load growth = 3.9 % p.a. over the next 10
    years

  – Registered generators = 22 (6 new since
    market start)

  – Register retailers = 15 (5 new since market
    start)
                         Impressive Investment


• 700 MW new generation – in service
• 1100 MW new generation – under
  construction
• Renewable capacity doubled (125 MW to
  250 MW)

• Funded entirely by the private sector!!
                                                                          Generation Market Share

                                                                   2007/08 Reserve
       Energy Market
                                                                    Capacity Year
      Commencement




        2008/09 Reserve                                            2009/10 Reserve
         Capacity Year                                              Capacity Year




                                    2010/11 Reserve
                                     Capacity Year




Verve Energy   Alinta   Synergy   Goldfields Power   NewGen   Griffin Power   Perth Energy   Other
                                   Fuel Diversity


•   45% gas fired
•   15% dual (gas and oil) fired
•   25% coal fired; and
•   10% renewable

• BUT – single dependency on a one
  natural gas pipeline (1600 km)
Price response
Market Volumes
                                     Retail Market


• > 160 MWh per annum – Contestable (approx.
  2,000 customers)

• 50 MWh to 160 MWh per annum – can chose a
  regulated tariff (approx. 15,000 customers)

• < 50 MWh per annum – non-contestable on a
  regulated tariff (approx. 960,000 customers)
                                     Retail Tariffs


• Last domestic price change – 1997/98 (10 years
  ago)
• Not reflective of costs!!!
• Requires a State subsidy of A$790 Million over
  the next 4 years (excluding transmission)
• Proposal to increase by over 100%
   > 70% generation costs
   > 30% transmission investment


• But - Change of government!
                                            Issues



• The current market an evolutionary step

  – Too complex – particularly settlement
  – Not responsive to intra-day events
  – Balancing Market uncompetitive
  – Market design predicated on an
    unconstrained grid
                             Challenges




• Accommodating renewables

• Investment uncertainty
Thank you

				
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