AER says NEM not working as planned intended: AGL, and Hydro Tasmania have market power, and use it, at consumer cost |
First 8 of 8 paragraphs shown Despite generally benign conditions, concerns remain that some generators have been exercising market power in some regions, argued Australian Energy Regulator. A number of spikes in the past two years coincided with strategic generator bidding. The way its supposed to work: The NEM was designed to minimise the risk of market power, through an interconnected transmission grid that allows competition between generators. What goes wrong: "....there are circumstances in which baseload generators can price capacity at around the market cap and be certain of at least partial dispatch. This behaviour is often more evident at times of peak demand, typically on days of extreme temperatures. Transmission outages aid market power: 'The opportunities for market power are enhanced if transmission interconnector limits are reduced. Given the relatively inelastic demand for electricity and the high market price cap, such circumstances can lead to significant opportunities for price manipulation. South Australia and AGL: There have been continuing concerns in South Australia, where spot prices in the past two years were significantly higher than in other mainland NEM regions. In the early months of 2009 South Australian spot prices exceeded $5000 per megawatt hour (MWh) on 27 occasions. Bidding strategies of AGL Energy at Torrens Island: 'The bidding strategies of AGL Energy for its Torrens Island power station were a key contributing factor on most occasions. The events typically occurred on days of extreme temperatures and demand, which created a tight supply demand balance. Under these conditions, Torrens Island can bid a significant proportion of its capacity at around the market cap and be guaranteed at least partial dispatch. Market bidding strategies by Hydro Tasmania: 'More recently, market bidding strategies emerged as a concern in Tasmania. In June 2009 the spot price in Tasmania exceeded $5000 per MWh on 13 occasions. The spikes were often driven by Hydro Tasmania making sudden and repeated cuts in the output of its non-scheduled (mini hydro) generators, in conjunction with strategic bidding for the rest of its portfolio. The strategy led to administered pricing being applied for four days in June the first time for Tasmania. Tasmania also experienced extreme prices for raise contingency frequency control services in early April.. ...Log in to read rest of Article or image. |