Near-Term Reliability Auctions in the NEM: Lessons from International Jurisdictions
Prepared for the Australian Energy Market Operator (AEMO)
The Australian National Electricity Market (NEM) has experienced a series of events in the past year, including a blackout and involuntary load shedding in South Australia, the retirement of the Hazelwood power station, and the failure of the Tasmania–Victoria interconnector. These events had a variety of causes, but they highlight the potential vulnerability of reliability and system security in the future as variable renewable electricity (VRE) resources further displace traditional capacity that historically provided dispatchability and other grid services.
The Commonwealth requested that AEMO evaluate the need for dispatchable resources in the NEM and how various options for obtaining these resources could impact wholesale prices. As one part of its response to the government’s request for advice, AEMO asked The Brattle Group to review the experience of other jurisdictions around the world that have used a range of different approaches to securing supply commitments to improve reliability and security. We present a series of case studies of other markets’ experiences that may provide useful lessons for the NEM. For each case study, we describe the problem(s) faced by the market, the chosen solution, and highlight key insights applicable to the NEM’s current situation. The case studies we have chosen include measures implemented in energy-only markets like the NEM and from a variety of other market and regulatory contexts.
