WG C5.20 – Drivers for Major Change in Electricity Markets

WG C5.20 – Drivers for Major Change in Electricity Markets

Whether it is to drive down the price to end customers or to improve the overall reliability and security of supply, major changes to competitive electricity markets are considered from time to time with varying degrees of success. Working Group C5.20, convened by Greg Thorpe from Australia, has recently examined these issues and has now published Technical Brochure 709 on Drivers for Major Change in Electricity Markets.  Other Australian members on the working group were David Bowker (who originally started the group) and Tim Baker.  This work is particularly relevant to Australia at this time as the effectiveness of the National Electricity market in providing adequate reliable generation capacity and meeting agreed emission targets, at an affordable cost is being challenged.

The working group examined 17 major electricity market changes from 11 countries by assessing the following aspects: 

• the objective of the change  (e.g. arrangements for management of reliability and retail competition),
• who initiated the change (e.g. government or system operator) and,
• lessons learned from success or failure. 

The results indicated most major changes in international markets target improvements in reliability and security and are initiated by system operators, governments or central bodies such as Regulators, depending to some degree on the governance structure of each market.  Interestingly, compared to the international systems that were studied, the NEM and WEM in Australia both appear to have relatively good opportunities for market participants to propose rule changes, although in practice most major changes are still initiated by a central market body or system operator.  Figure 1 below shows the market characteristics affected by the changes that were examined.

Figure 1 Market characteristics affected by major change

The working group considered that a reason why most major changes are initiated by a central body may be due to the fact that major changes require considerable effort to present and also that commercial participants will generally adjust their positions around existing rules or not participate in commercially unattractive parts of a market.  For these reasons the group surmised that there might be a greater number of minor changes initiated by commercial participants – but this was not studied.   The working group also considered that as governments and central bodies initiate the majority of major change it is incumbent on them to be sufficiently resourced and expert for the task.  This is less of an issue in Australia, as special purpose bodies have been established, but can be of concern elsewhere.  

One issue considered related to peer-to-peer trading, where surplus embedded, or behind the meter, generation from one end customer is sold to another.  This is seen as the start of a new direction for competitive electricity markets, with similar changes being proposed or underway in a number of other markets.

A number of changes studied were to enhance previous changes that had not been entirely successful (although, not surprisingly, no cases were volunteered that were rated as unsuccessful).  These partially successful changes were valuable contributions as they provided pointers for greater probability of success in the future.

The Technical Brochure (TB) 709 can be viewed on e-CIGRE and is free to members. 

The cost to non members is €50.