The NEM mechanics are coming

Energy ministers will be offered a range of proposed repairs to the National Electricity Market (NEM) when the Council of Australian Governments (COAG) Energy Council meets next month.

Today’s diagnostic report of the health of the NEM by the Energy Security Board (ESB) prioritised energy security over reliability as the two critical issues facing the market.

The “Health of the National Electricity Market” report highlighted the need for reforms to frequency and voltage services markets as well as possible reforms to the reliability standard, longer term contracting of emergency reserves and broader changes to the design of the NEM after 2025 to manage reliability as the system decarbonises.

“NEM modifications are necessary to meet the needs of future sources of generation and flexible resources can be anticipated including demand side response, storage and distributed energy resource participation” the ESB report said.

The mechanical solutions to all these challenges are relatively well understood. The market reforms being considered on March 20 and throughout the rest of 2020 will be how and whether markets remain the most efficient way of delivering these services, or whether there are more direct solutions that are simply implemented.

A good example of this is chronic high voltages being reported across most distribution networks as a result of the high penetration of rooftop solar PV systems across suburban Australian town and cities.

High voltages are created when solar systems are exporting surplus power into the network and there is insufficient local demand to soak it up. The resulting high “pressure” in the network eventually stops some solar generation from getting onto the grid.

It can be managed by modifications to modern inverters and by increasing the capacity of distributed battery storage to soak up some of the pressure. The challenge for Energy Ministers is how these reforms are delivered across the sprawling networks in a way which delivers the greatest benefits to the grid at the lowest cost.