Australian Energy 2019 Market Operator Limited ABN 94 072 010 327 www.aemo.com.au Annual Report Zema Energy Studies Scholarship Matt Zema, AEMO Chief Executive Officer, 2009 to 2016 In this report, AEMO reflects on our first decade of operation since establishment in July 2009, and how we’ve expanded our role and the capability of our people as the energy sector has undergone a rapid transformation. It is fitting that we pay tribute to our founding Chief Executive Officer, Matt Zema, who tragically passed in 2016. Matt epitomised the leadership spirit of energy sector reform and his legacy will continue through the next generation of leaders in Australia’s energy sector with the Zema Energy Studies Scholarship. AEMO, with the support of the Council of Australian Governments Energy Council and other contributors, and in partnership with Monash University, has established the scholarship to support PhD students specialising in interdisciplinary energy studies, to deepen their expertise, unlock their full leadership potential and gain exposure to our national energy industry. Graduates of the program, through their sophisticated and adaptive research skills that bridge the worlds of academia and industry, and later through their leadership, will help shape the energy world of the future. Contents About AEMO 4 Consumer engagement 22 Changes across the NEM and WEM 6 Digital innovation 24 Chairman’s Message 7 People 26 Managing Director and Corporate strategy 28 CEO Message 8 Corporate governance 30 AEMO Executive Leadership Team 10 Board of Directors 32 System Operations 14 Board committee focus areas 35 System design 16 AEMO members 36 Markets 20 Financial Statements 38 4 Australian Energy Market Operator About AEMO AEMO is the independent system and market operator for the National Electricity Market (NEM), the Western Australian (WA) Wholesale Electricity Market (WEM), wholesale and retail gas markets and supply hubs, and gas systems. AEMO is a not-for-profit organisation Our functions are prescribed in BOM, ARENA, the Clean Energy partly owned by federal and state the national electricity and gas laws, Regulator (CER) and the Clean governments, with members from with the national electricity and gas Energy Finance Corporation electricity and gas generation, rules and other legislative (CEFC) help increase our transmission, distribution, retail and instruments providing the regulatory understanding of the challenges resources businesses across Australia. framework, procedures and and in developing solutions. processes for the electricity and gas Our purpose is to shape a better markets we operate. AEMO’s 10-year anniversary energy future for all Australians, and we are committed to leading and AEMO also has a unique role in On 1 July 2019, AEMO celebrated our converting the current challenges Victoria, as the State’s transmission 10-year anniversary as Australia’s into sustained advantages for energy network planner. independent system and market consumers. operator, responsible for electricity The organisation also works closely and gas market functions, system AEMO’s role is to pursue the with our members and a range of operations for the NEM, operation of national electricity, gas and energy important energy industry Victoria’s gas transmission network, retail objectives of stakeholders on issues of future and national transmission planning. system security and design. AEMO has taken on a progressively AEMO collaborates with, and larger range of responsibilities over promoting efficient undertakes work at the request of, the course of our first decade. This investment in … individual jurisdictions, the Council of includes the operation of the WEM, Australian Governments (COAG) the South West Interconnected operation and Energy Council, and Western System (SWIS), and several gas Australia’s Public Utilities Office market functions. use of electricity (PUO) and Economic Regulation and natural gas Authority (ERA). Australia’s energy systems have changed significantly since 2009. The services for the We also work with State-based scale and, more recently, the speed of long-term interests regulators: Independent Pricing entry of variable renewable energy and Regulatory Commission generation, and the adoption of of consumers … (IPARC – ACT); Independent distributed energy resources (DER) with respect to Pricing and Regulatory Tribunal and storage as core elements of the (IPART – NSW); Essential Services integrated energy ecosystem, are price, quality, safety, Commission (ESC – VIC); Queensland fundamentally changing the Competition Authority (QCA); integrated power system. reliability and Essential Services Commission of AEMO’s focus and mission is to security of supply”. South Australia (ESCOSA); and the Office of the Tasmanian Economic pursue the technical knowledge, Regulator (OTTER). operational focus, requisite collaboration and innovation to AEMO also maintains a series of produce best-in-class solutions that AEMO operates within a broader partnerships across the energy support Australian consumers to energy market governance structure, industry in Australia and globally to realise the benefits of the energy alongside the Australian Energy gain access to new insights and industry transformation, today and Market Commission (AEMC) and the provide leading perspectives on into the future. Australian Energy Regulator (AER), energy transformation. In particular, and is a member of the Energy our strategic relationships and Security Board (ESB). information-sharing with CSIRO, Annual Report 2019 5 AEMO's responsibilities have grown over the decade as Australia's energy industry has transformed September 2010: Began operating the December 2010: July 2009: gas Short Term Developing the AEMO’s Trading Market first National inception - NEM Transmission Network Development Plan June 2012: Developed the first independent electricity forecasts (NEM) March 2014: Implemented the Wallumbilla gas supply hub May 2014: Developed the Australian Solar November 2015: Forecasting System Began operating the WA wholesale (electricity) and retail (gas) markets July 2016: Commenced as the WA South West interconnected power system operator July 2018: Published the inaugural Integrated System Plan for the NEM March 2019: Commenced operating the Capacity Trading Platform and a Day Ahead Capacity Auction 6 Australian Energy Market Operator Changes across the NEM and WEM Rooftop solar Variable renewable Customers photovoltaic systems energy capacity 35,637 1.89GW 9.73 million TO TO TO 2.29 million 6.16GW 11.19 million Capacity Max demand Grid supplied electricity 2009 52.01 39.01 224.63 GW GW TWh TO TO TO 2019 61.08 35.65 213.36 GW GW TWh Registered participants 2009 298 2019 463 Annual Report 2019 7 Chairman’s Message As anticipated in my first Chairman’s Message last year, 2018-19 has presented many challenges for AEMO. Our successes and ongoing pressures are again presented in this Annual Report. In fulfilling its governance risk assessment. The development of consumers, AEMO must responsibilities, the Board has and publication of the plan is an continually operate on both an focused on both oversight of AEMO’s exercise in both transparency and immediate and a strategic timescale. operations, particularly from a risk accountability, and it will be the basis However, they have also highlighted management perspective, and of future Annual Reports. It is firmly some limitations in our funding development of our strategy. grounded in our statutory objective model, which, like many aspects of – the long-term interests of our energy systems and markets, are This work has now been published in Australian energy consumers. no longer optimum. The Board will be the AEMO Corporate Plan 2020-23, a reviewing this during 2019-20. three-year plan outlining our Three specific initiatives to highlight operating environment, priorities, from 2018-19, in which the Board was Over the last year the Board has budget, performance indicators and deeply engaged, are: engaged with many stakeholders – government and industry members, • Capital Program: the Board market bodies, industry associations, approved AEMO’s largest capital and energy consumers. I thank them investment program, which will all for their candour and advice on replace our legacy systems with the what they want from their modern digital platforms needed independent system and market to manage our increasingly operator. We will continue this complex systems and markets. engagement in 2019-20. • Australian Energy Simulation Centre: The Board welcomed Ms Anne Nolan in collaboration with CSIRO, we have and Mr Nino Ficca as Directors in completed the feasibility study for February, strengthening our this new capability, a ‘digital twin’ of capabilities with the addition of the Australian energy systems and decades of experience in Australia’s markets that will support our system energy sector. On behalf of the planning and be accessible by all Board, I also thank Mr Stephen Orr market participants, policy makers for his outstanding contribution and researchers. before retiring in November. • Zema Energy Studies Scholarship: The non-executive Directors of the in memory of AEMO’s founding AEMO Board enjoy an excellent CEO Matt Zema, and in partnership working relationship with the with Monash University, we have Managing Director and CEO, Ms Audrey Zibelman, and with established a new PhD Scholarship management. I thank Audrey for her for students specialising in leadership of a first-class executive energy studies.