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Rules and Regulations – the WA Energy Market is Changing

Rules and Regulations – the WA Energy Market is Changing

What’s new:

  • The electricity  market and infrastructure need to change to keep up with advances in technology, changing consumer demand and the uptake of solar PV
  • The WA Energy Transformation Strategy has been created to guide the future of energy generation and supply to meet the changing needs of the market.

On March 9th, Energy Minister Bill Johnston launched the Western Australian Energy Transformation Strategy that “will deliver cleaner, affordable and more reliable energy to households and businesses for decades to come.”

Reform in the WA electricity market has been ongoing for more than 4 years – however, changes in governments and Energy Ministers have resulted in a process that has, until recently, been stalled.  All stakeholders recognize the need for change due to the rapid uptake in solar PV by customers, more wind farms and advances in batteries and other technologies.

The industry is at a point now where if some fundamental changes are not made, costs will continue to increase and there is a risk that the entire grid could become unstable – which could force drastic measures – like shutting off solar PVs at certain times of the day.

The Transformation Strategy aims to do the following over the next 2 years:

  • Develop a Whole of System Plan to provide guidance on the most appropriate generation mix and network planning into the future – the first plan is to be developed by mid-2020
  • Create a Distributed Energy Resources (DER) Roadmap to identify ways to maximise the benefits that distributed energy – like rooftop solar PV and batteries – can provide the grid in the future
  • Modernise network connection and market arrangements to allow more low-emission energy technologies to connect to the network
  • Plan for an orderly retirement of coal-fired generation.

The Energy Transformation Strategy can be found at:

https://www.treasury.wa.gov.au/uploadedFiles/Site-content/Energy_Transformation/Energy-Transformation-Strategy.pdf

What does this mean for electricity prices?

Generation from wind farms and solar PV competes based on cost with other forms of generation to supply electricity to customers.  In terms of the electricity costs to customers, this is the only component subject to competition.  The delivery of electricity through Western Power’s network is regulated by the Economic Regulation Authority.  Ancillary services procured by the market operator to ensure that the grid is stable and reliable are provided by only a few parties with no competitive tension. 

Competition in the generation sector will continue to push generation costs down, but without changes to the overall market, network and ancillary costs will easily outpace any generation cost savings.  Currently the actual generation of electricity makes up only about 30% of the average bill, network charges 30-50%, with the remaining from non-competitive market costs.  Whilst customers may seek to reduce electricity consumption either through conservation or the addition of solar PV on their roofs, 70% of the costs of supplying energy may continue to go up.

Changing the way Western Power is regulated and opening the ancillary service markets to more technologies (like batteries) should help limit those increases while at the same time allowing the grid to transition to a low-carbon system.

What does it mean for customers?

The Whole of System Plan, incorporating the retirement of coal-fired generation, should provide information to market participants and the state government to ensure that investment in the future electricity market is done as efficiently as possible.

Consumers and market participants alike will have to wait and see what outcomes are delivered by the WA Energy Transformation Strategy. Changes are expected to begin roll-out late 2019 to early 2020. We will continue to keep our customers informed.

Change Energy’s CEO – Geoff Gaston is a member of the Market Advisory Committee and participates a variety of working groups that help guide changes to the electricity market.  Geoff advocates for customers and to ensure that the market operates as efficiently as possible. 

If you have any questions about the electricity market please contact Geoff at geoff.gaston@changeenergy.com.au.