Priority area: linking financial incentives with physical needs to deliver reliable supply
More variable demand from customers and more variable supply from generators makes forecasting a challenge and adds risk to operational and investment decisions.
We are focussed on maintaining the link between the physical needs of the system and the financial incentives facing market participants.
Given the pattern of investment and the impact it will have on operating the power system, the access regime needs to change. It is crucial that generators and storage are provided the correct locational signals for their investment decisions, and the tools to manage the risk of transmission congestion and losses.
Currently decisions by generators on where to locate, and how to operate generation, are not in lockstep with decisions on where and how much transmission investment there should be. This is slowing the pace of integrating renewables into the power system and putting a handbrake on our ability as a country to reduce carbon emissions.
Along with AEMO, the AER and the Energy Security Board, we are working to make sure we pull two important levers at the same time – making sure we invest in transmission outlined in the ISP and making sure we deliver access reform to incentivise generators to locate more efficiently. We are also working collaboratively to bring about plans that will let large customers routinely trade their energy use in the NEM – so they can reduce their electricity consumption in the short-term in response to wholesale market price signals.
Key projects considering changes required in this priority area of reform include:
- Coordination of generation and transmission investment – access and charging review
- Wholesale demand response mechanism
Find out more how spot and contract markets work together to keep the lights on and prices stable.
Find out more about what the AEMC has done to encourage the right amount of investment in the power system's long term capacity.
AEMC’s system security and reliability action plan
This is part of the AEMC’s broader system security and reliability action plan. We are developing market frameworks which allow continued take-up of new generating technologies while keeping the lights on at the least cost to consumers.