By Executive General Manager Economic Analysis, Tim Nelson
William Edwards Deming is often quoted as saying, ‘In God we trust, all others bring data!’ As a statutory organisation the AEMC can’t take a position in relation to trusting God, but we certainly agree with the sentiment around the importance of data!
It’s in this context the AEMC is developing its data analytics framework. Spearheaded by Oliver Nunn and Joseph Nunez in the strategy and economic analysis team, the data analytics framework is the Commission’s set of policies, procedures, people, processes, hardware and software that support decision making and knowledge creation.
Data will increasingly be important for analysing changes to technology and electricity and gas market environments. For example, a consumer with an analogue electricity meter will have four data reads a year. But with a digital meter, this expands to 17,520 reads per year. Analysing 10 million household electricity accounts would involve 175 billion pieces of data! Gone are the days when a simple spreadsheet would suffice for analysing complicated policy problems.
There are many examples of the significant data analytics capability now present within the AEMC. The annual Residential Electricity Price Trends report now includes disclosure of a significant volume of supporting material, data and methodology documents. Stakeholders are able to unpack how the AEMC arrived at its conclusions by analysing the Databooks published on our website. Another recent example would be the predictive postcode analysis completed by the Commission in its assessment of the impacts of a default offer on retail electricity markets.
We have made significant efforts to provide greater transparency to stakeholders in the analysis we do. A notable example is the provision of large datasets to verify analysis that underpinned the Commission’s decision to shift from 30-minute to 5-minute settlement within the National Electricity Market. We are committed to continuing our collaborative approach to analytics with other market bodies, such as the AER, AEMO and the ACCC, as well as our broader industry, consumer and environmental stakeholders.
Behind the scenes at the AEMC, significant effort is being made to expand the analytical capabilities of all of our people. We have developed and deployed training programs in statistical programming. We are using data analytical tools that allow for complex energy market analysis but does not require our people to be data scientists or business intelligence experts. While the Strategy and Economic Analysis team will continue to be at the front end of data analysis, it is important that everyone is able to continuously improve their data management and analytical capabilities.
As we move into 2019, we have developed our own electricity wholesale market modelling capability and are exploring the application of artificial intelligence in market modelling. Utilising Energy Exemplar’s PLEXOS simulation software, we are now able to conduct robust simulations of the National Electricity Market to determine the potential impacts of changes to policy settings. In this way, we are well placed to improve our market development advice to governments and provide more robust analysis when considering National Electricity Rule and National Gas Rule change requests.
In 2019, we also intend to develop our own wholesale gas market modelling capabilities. The gas market has undergone profound changes as a result of the development of significant non-conventional reserves and an east-coast LNG export industry. As ageing coal-plants have been retired, the electricity market has become more dependent upon gas for firm dispatchable power. Understanding the interrelated nature of electricity and gas markets in greater detail will be a key focus of the Strategy and Economic Analysis team through 2019 and beyond.
Given the significant capabilities present within the Strategy and Economic Analysis team, Oliver and Joseph will be taking the lead on the AEMC’s Residential Electricity Price Trends reporting from 2019 onwards. While the CoAG Energy Council has tasked the Commission with reporting annually, we intend to provide a shorter report every six months. By providing our analysis at the same time as the traditional retail price resets in July (New South Wales, Queensland and South Australia) and January (Victoria), stakeholders will be better informed about the Commission’s views on the underlying drivers of cost and pricing within each region of the National Electricity Market.
Within the AEMC, we are committed to providing robust evidence to justify our conclusions. In the words of Carly Fiorina, ‘The goal is to turn data into information, and information into insight’.