The AEMC issued a final determination today to not make a rule as requested by Snowy Hydro and ENGIE requiring additional market participants to participate in the central dispatch process. The request would have required large industrial companies and smaller generators to inform AEMO of their planned consumption and generation, and to follow AEMO’s instructions.
Overall, the benefits to the market from the proposed changes were considered limited and uncertain, while the costs of the proposed change would be likely to flow through to consumers in the form of higher prices.
The central issue raised by the rule change requests related to the accuracy of demand and price forecasting and the flow-through effects on the market.
Our analysis found:
- the proposed changes would only apply to a limited number of generators and loads and would therefore have limited impact on pre-dispatch forecasting accuracy
- AEMO’s pre-dispatch demand forecasting is generally accurate at dispatch, meaning an efficient quantity of generation is dispatched
- price forecasting is less accurate, but this is to be expected as the pre-dispatch forecasts are a signalling process that assists market participants in planning and adjusting their generation and consumption
- the evidence linking forecasting inaccuracy to the actions of non-scheduled generation and load was inconclusive, and other causes of inaccuracy were identifiable, including the actions of scheduled generators and more general forecasting issues
- the costs of scheduling may be material to loads and smaller generators, and may flow through to consumer prices.