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1 National Electricity Market Edgar Hotan (Newspix) Edgar Hotan 1 NATIONAL ELECTRICITY MARKET CHAPTER 1 MARKET E N lectricity Table 1.1 National Electricity Market at a glance ational The National Electricity Market (NEM) is a wholesale market through which generators sell electricity in Participating jurisdictions Qld, NSW, Vic, SA, Tas, ACT eastern and southern Australia. The main customers are Regions Qld, NSW, Vic, energy retailers, which bundle electricity with network SA, Tas services for sale to residential, commercial and industrial Registered capacity 49 110 MW energy users. Registered generators 305 Customers 9.0 million The market covers six jurisdictions — Queensland, Turnover 2010 –11 $7.4 billion New South Wales, the Australian Capital Territory Total energy generated 2010 –11 204 TWh (ACT), Victoria, South Australia and Tasmania Maximum winter demand 2010 –11 31 240 MW1 — that are physically linked by an interconnected Maximum summer demand 2010 –11 34 933 MW2 transmission network. It has around 200 large MW, megawatt; TWh, terawatt hours. generators, five state based transmission networks 1. The maximum historical winter demand of 34 422 MW occurred in 2008. (linked by cross-border interconnectors) and 13 major 2. The maximum historical summer demand of 35 551 MW occurred in 2009. distribution networks that supply electricity to end use Sources: AEMO; ESAA, Electricity gas Australia, 2011. customers. In geographic span, the NEM is the largest Figure 1.1a interconnected power system in the world, covering a National Electricity Market electricity consumption distance of 4500 kilometres. Tasmanian entry 220 1.1 Demand and capacity 200 The NEM supplies electricity to over nine million 180 residential and business customers. In 2010 – 11 the hours Terawatt market generated around 204 terawatt hours (TWh) 160 1999–00 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10 2010–11 of electricity, with a turnover of $7.4 billion (table 1.1 and figure 1.1a). Demand levels fluctuate throughout the year, with peaks occurring in summer (for air conditioning) and winter (for heating). Fıgure 1.1b Figure 1.1b shows seasonal peaks rose from around 26 gigawatts National Electricity Market peak demand (GW) in 1999 to 35 GW in 2011. Table 1.2 sets out Tasmanian entry 40 the regional consumption profile. 35 1.2 Generation in the NEM 30 Electricity produced by large electricity generators Gigawatts 25 in the NEM jurisdictions is sold through a central 20 dispatch process that the Australian Energy Market 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Operator (AEMO) manages. Fıgure 1.2 illustrates Summer Winter the location of large generators in the NEM. Sources: AEMO; AER. 25 Figure 1.2 Large electricity generators in the National Electricity Market Power stations: Coal Gas Barron Gorge Hydro Diesel/fuel oil/multi-fuel Kareeya Wind Biomass/bagasse Transmission network Yabulu Mount Stuart Invicta Mill Collinsville Mackay Barcaldine Stanwell Yarwun Gladstone Callide A, B & C Darling Downs Roma Condamine Tarong North Kogan Creek Tarong Braemar Oakey Wivenhoe Millmerran BRISBANE Swanbank Northern Broken Hill Playford North Brown Hill Redbank Clements Gap Hallett Hallett 1 Bayswater Liddell Mount Millar Hallett 2 Eraring Hunter Valley Snowtown Mintaro Mount Piper Port Waterloo Wallerawang Vales Point Cathedral Rocks Lincoln Angaston Colongra Munmorah Pelican Point Capital Wattle Point Burrinjuck Gunning SYDNEY Quarantine Uranquinty Tallawarra Torrens Island Starfish Hill Blowering Shoalhaven Osbourne ADELAIDE Upper Tumut Woodlawn Dry Creek Somerton Murray Tumut CANBERRA Challicum Hills Dartmouth Guthega Snuggery Ladbroke McKay Waubra Kiewa Canunda Grove Newport Eildon Brown Mountain Lake Bonney 1, 2 & 3 Laverton Yallourn Bairnsdale Portland Anglesea Valley Power Jeeralang Loy Yang A & B Yambuk MELBOURNE Morwell Hazelwood Woolnorth Tamar Valley Reece Poatina John Butters Tungatinah Gordon HOBART Sources: AEMO; AER. 26 STATE OF THE ENERGY MARKET 2011 CHAPTER 1 MARKET E N lectricity Table 1.2 Electricity supply to regions of the National Electricity Market (terawatt hours) ational QLD NSW VIC SA TAS1 SNOWY2 NATIONAL 2010–11 51.5 77.6 50.9 13.5 10.2 203.7 2009–10 53.2 78.1 51.2 13.3 10.0 206.0 2008–09 52.6 79.5 52.0 13.4 10.1 207.9 2007–08 51.5 78.8 52.3 13.3 10.3 1.6 208.0 2006–07 51.4 78.6 51.5 13.4 10.2 1.3 206.4 2005–06 51.3 77.3 50.8 12.9 10.0 0.5 202.8 2004–05 50.3 74.8 49.8 12.9 0.6 189.7 2003–04 48.9 74.0 49.4 13.0 0.7 185.3 2002–03 46.3 71.6 48.2 13.0 0.2 179.3 2001–02 45.2 70.2 46.8 12.5 0.3 175.0 2000–01 43.0 69.4 46.9 13.0 0.3 172.5 1999–2000 41.0 67.6 45.8 12.4 0.2 167.1 1. Tasmania entered the market on 29 May 2005. 2. The Snowy region was abolished on 1 July 2008. The New South Wales and Victorian data subsequently reflect electricity consumption formerly attributed to Snowy. Note: Estimates based on generation required to meet energy requirements within a region — calculated as regional generation plus net flows into the region across interconnectors. Sources: AEMO; AER. 1.2.1 Technology mix investment in South Australia, wind now represents 24 per cent of statewide capacity but has accounted for Across the NEM, black and brown coal account for 1 up to 86 per cent of output. around 56 per cent of registered generation capacity, but this baseload plant supplies around 78 per cent of Non-traditional technologies are also emerging as output (figure 1.3). Victoria, New South Wales and potential suppliers of electricity, including solar and Queensland rely on coal more heavily than do other geothermal generation (section 1.6). regions (figure 1.4). Figure 1.3 Gas fired generation accounts for around 21 per cent Registered generation in National Electricity Market, of registered capacity across the NEM but supplies — as by fuel source, 2011 intermediate and peaking plant — only around 12 per cent 60 of output. South Australia heavily relies on gas fired 50 generation, and most new investment in other regions 40 over the past decade was also in gas peaking plant. 30 Hydroelectric generation accounts for around 20 16 per cent of registered capacity but less than 8 per cent 10 of output. Its contribution to output has increased generation of total cent Per 0 recently with improved rainfall in Tasmania and eastern Black Brown Gas Hydro Wind Liquid Other coal coal Australia. Wind plays a relatively minor role in the Capacity Output market (around 4 per cent of capacity and 3 per cent Note: Output is for 2010 – 11. of output), but its role is expanding under climate Sources: AEMO; AER. change policies. Following significant wind generation 1 Generators seeking to connect to the network must register with AEMO, unless granted an exemption. 27 Figure 1.4 intensive sources. Kogan Creek power station in Registered capacity in regions, by fuel source, 2011 18 000 Queensland is the only major new investment in coal fired generation in the past five years. Gas fired 16 000 and wind generation have attracted the bulk of 14 000 new investment. 12 000 The Australian Government will introduce a carbon 10 000 price on 1 July 2012 as part of its Clean Energy Future 8 000 Plan. The plan targets a reduction in carbon and other Megawatts 6 000 greenhouse emissions to at least 5 per cent below 2000 levels by 2020 (and up to 25 per cent with equivalent 4 000 international action). The central mechanism will place a 2 000 fixed price on carbon for three years, starting at $23 per 0 Qld NSW Vic SA Tas tonne. It will then move to an emissions trading scheme Black coal Brown coal Gas Hydro in 2015, with the price determined by the market. Wind Liquid Other The plan includes assistance of $5.5 billion for emission Note: New South Wales and Victoria include Snowy Hydro capacity allocated intensive generators, and contracts for the closure of up to those regions. to 2000 MW of coal fired generation. The plan also Sources: AEMO; AER. establishes the Clean Energy Finance Corporation, The extent of new and proposed investment in weather with access to $10 billion over five years for investment dependant generation such as wind and solar power in renewable and low emissions energy. The Australian raises concerns about system security and reliability. Parliament passed the legislation to implement the plan This led to changes in how wind generation is integrated in November 2011. into the market. Since 31 March 2009 new wind The Australian Government also operates a national generators greater than 30 megawatts (MW) must renewable energy target (RET) scheme, which it be classified as ‘semi-scheduled’ and participate in revised in 2011. The scheme is designed to achieve the the central dispatch process. This requirement allows government’s commitment to a 20 per cent share of AEMO to manage the output of these generators to renewable energy in Australia’s electricity mix by 2020. maintain the integrity of the power system. It requires electricity retailers to source a proportion of 1.2.2 Climate change policies and their energy from renewable sources developed after technological change 1997. Retailers comply with the scheme by obtaining renewable energy certificates created for each megawatt The pattern of generation technologies across the hour (MWh) of eligible renewable electricity that an NEM is evolving in response to technological change accredited power station generates, or that eligible and climate change policies that governments have solar hot water or small generation units are deemed implemented or proposed.
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