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Interpretation & Understanding of
the Nigerian Transitional Electricity
Market Rules
www.transafricanenergy.com
Dr Stephen [email protected]
Trans African Energy Pty Ltd
Advisory and consulting services
Australia’s National Electricity Market
Electricity Market Rules
Abuja 15 September 2015
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Industry unbundling
Generation
Transmission
System & Market Operator
Distribution
Retail supply
Market reform
Competitive wholesale market
Retail competition
Independent SMO
Decentralised Planning*
Regulated T&D
Shareholding
Mixed ownership
Generation and retail largely
private
T&D private and state-owned
Australian Energy Market Operator (AEMO)
System & Market Operator *
National Transmission Planner
Energy Market Development
Corporate entity under Australian Corporations Law.
Board comprised of government and industry representatives
Operating costs recovered from Market Participants
* And Gas Markets Operator
Policy, Administration and Regulatory
Ministerial Council on Energy (MCE)
Legislation and policy development
Australian Energy Market Commission (AEMC) Rule change and policy advice to MCE
Australian Energy Regulator (AER)
Regulation of network tariffs
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Market Generators
‘Gross pool’ – Generators sell all electricity output through the spot market.
Dispatch categories
Scheduled generation >30 MW
Semi-scheduled generation > 30 MW intermittent supply.
Non-scheduled generation < 30 MW
Market Customers
Purchase electricity supplied to a connection point on a NEM transmission or distribution system at spot price.
Electricity Retailers: buy electricity at spot price and on-sell it to end-use customers.
End-use Customers: buy directly from the market for own use.
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Network service providers
• Transmission Network Service Provider
• Distribution Network Service Provider
Regions and interconnectors largely based on Australia’s legacy state based industry structure
▪ Five regional reference nodes
▪ Five regulated interconnectors
Queensland New South Wales Victoria South Australia Tasmania
NB We will come back to Western Australia later
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ISMO
Ma
rke
t o
pe
rati
on
s*
Prudential requirements
Central dispatch and price determination
Ancillary services
Network losses and constraints
Generation and system adequacy
Settlements8
The NER (Version 77) is established under legislation covering (among other matters):
• Market participants’ rights and obligations
• Market operations
• Regulatory investment test
• Economic regulation of network tariffs
• Power system security
• Metering and IT
• Dispute resolution
* NB. Market Rules Chapter 3 NER.
Spot market and pricing
Spot market managed in real-time through a centrally-coordinated dispatch process.
Generators offer supply bids with specific amounts of electricity at particular prices., ramp rates, etc
Offers are submitted every five minutes of every day.
A dispatch price is determined every five minutes.
Six dispatch prices are averaged every half-hour to determine the spot price for each NEM region.
Price determination
Source: AEMO
Spot price capped at AUD $12 500/MWh
Dispatch BIDS capped AUD $-1000/MWh
NB to balance swap arrangements
Inter-regional losses from the regional reference node in one region to the regional reference node in an adjacent region.
Inter-regional loss factors:
Describe marginal losses from a regional reference node in one region to the regional reference node in an adjacent region
▪ for a particular time period ; and
▪ a defined range of operating conditions (i.e. loads)
Inter-regional loss factor equations per AEMO methodology.
Used in the central dispatch process to reflect the cost of inter-regional losses.
Units dispatched according to bid price / loss factors / system constraints10
Ancillary Services
1. AEMO operates eight separate markets for the delivery of Frequency Control Ancillary Services (FCAS)
1. FCAS providers bid their services into the FCAS markets in a similar way to how generators bid into the energy market.
2. AEMO purchases Network Control Ancillary Services (NCAS) and System Restart Ancillary Services (SRAS)
1. Procured under competitive tenders with service providers.
Charges are allocated on a user pays principle.
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Gross pool
Market Participants deal with AEMO- NOT with each otherwhen selling or buying wholesale electricity.
Limited recourse w.r.t. AEMO
Payments to Generators are limited to the money available to AEMO from receipts from Market Participants
AEMO has powers to drawdown on credit support if amarket participant is indefault of payments.
Any shortfall in AEMO’srecovery from any MarketParticipant in relation to abilling period is shared acrossthe generators of electricity byreducing the amount paid tothem for electricity suppliedthrough the Market in thatbilling period.
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Risks from price volatility (wholesale market capped at AUD$ 12,500/MWh)
Rapid payment obligations Largest retailer (20% of NEM) with spot price at $12,500/MWh will increase
exposure to AEMO at over $1Million per minute
Risk of non payment covered by bank guarantees with AEMO AEMO typically holds $1.5Billion to $3.5Billion in bank guarantees Level of guarantee (Max Credit Limit) driven by energy traded, average price and
price volatility
Daily review of participant exposures Rapid payment requirements when near limits Default then suspend if obligation not met Rapid retailer of last resort required
AEMO must administer medium term and short term projected assessment of system adequacy (PASA.)
On a weekly basis AEMO must collect and analyse information from all Scheduled Generators, Market Customers, Transmission Network Service Providersand Market Network Service Providers about their intentions for:
generation, transmission and market network service maintenance scheduling;
intended plant availabilities;
energy constraints;
And plant conditions which could materially impact upon power system securityand reliability of supply; and significant changes to load forecasts previously notified to AEMO; and
for the following 24 months prepare the unconstrained intermittent generation forecasts for the following 24 months,,,
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Statement of Opportunities
AEMO publishes a 10 year forecast of Opportunities each year.
This publication provides information to assist market participants assess the future need for :
electricity generating capacity,
demand side capacity; and
augmentation of the network
National Transmission Network Development Plan
As the National Transmission Planner for the electricity transmission grid. AEMO
provide historical data and projections of network utilisation and congestion;
summarise emerging reliability issues and potential network solutions; and
present information on potential network augmentations and non-network alternatives to projected congestion.
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The Australian market operator has identified the following issues as shaping market operations going forward:
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Will regulation impede uptake of new tech
and services?
Will technology overtake incumbent
firms?
Can markets and policy preferences find a
balance?
