Tuesday, February 22, 2022

The Sorry State of the NEM

The National Electricity Market, or NEM, is the name given to the interconnected electricity grids of Queensland, New South Wales, Victoria, South Australia, Tasmania and the ACT. It grew out of the micro-economic reform agenda of the Hawke government (though its initiation predated the Hilmer report). 

Progressively since the NEM began Energy Ministers meeting under a string of different names progressively added elements to the national framework. Economic regulation of distribution networks was added in 2006, and retail as the National Electricty Consumer Framework, or NECF, progressively from 2012-16. Victoria famously hasn't adopted the NECF and opinions differ among consumer advocates of whether this has really generated significant additional benefit to consumers.

Unfortunately, the disintegration of cooperation between the States and the Commonwealth over climate action has fractured other aspects of the collaborative approach. Not least of these are differential approaches to policy on Renewable Energy Zones. 

The latest difference is also climate related. Recent increases in damage caused by weather events - bushfires and storms - has resulted in a great deal of interest in how distribution networks (DNSPs) should respond to the expected increase in Major Event Days. In NSW the three DNSPs have joined with the single DNSPs that cover the ACT, Tasmania and Northern Territory to engage with consumers on how they should adapt their operations

The risk with this approach is that the networks will utilise the 'fear factor' to obtain consumer support for massive investment in making the network more resitant to damage, but do little to help communities if power is interrupted.

In Victoria the Government, grandstanding as the Victorian Energy Minister is want to do, has announced a review by 'an expert panel.' That the panel is composed of an experienced consumer advocate, a consultant in regulatory reform, and a further consultant whose main claim to fame was author for Energy Networks Australia of the Electricity Network Transformation Roadmap that has almost never been referred to after its completion. Missing from the panel is anyone actually expert in the design and operation of distribution networks. 

My primary regulatory experience comes from the Australian telco sector where 'self regulation' is at least a goal, and has progressively been achieved. In electricity, as Fiona Simon observed in her book Metaregulation in Practice, one of the failures of self-regulation in electricity was the constant need of Ministers to be seen doing something.

Developing distribution networks to manage the increased likelihood of extreme weather events causing mass disruption needs to be an agreement between consumers and networks. That agreement, or negotiation, needs to be about more than just making networks more robust. It needs to consider how distributed resources could enable islanded networks to continue to provide power for essential services. It needs to consider what changes could be made that would facilitate restoration works.* Indeed it needs to consider every alternative so that the right balance can be struck between price and service quality (a catch all term that includes voltage maintenance, reliability and safety).

The NSW network process is far from ideal, but it is at least starting in the right place. Bespoke processes driven by State Governments are the antithesis of the system we are trying to establish. 
Life is what happens while you are busy making other plans JWL

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