Transcript Locational Signals for Generation and Transmission investment

Locational Signals for Generation and
Transmission investment
• Transmission Investment:
“the knottiest problem in the (energy)
deregulation process”
Steven Stoft
ACCC Regulation Conference 2010- Steve
Edwell
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Locational Signals for Generation and
Transmission investment
• The aim is to avoid:
– Wrongly located generation
– Crowding out efficient generation by transmission
overbuild
– Delay in efficient transmission augmentation
ACCC Regulation Conference 2010- Steve
Edwell
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Locational Signals for Generation and
Transmission investment
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•
•
•
Transmission investment is lumpy
A “chicken and egg dilemma”
Outdated transmission flow analysis
Generation tends to happen first
ACCC Regulation Conference 2010- Steve
Edwell
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Chart 1
High Cost Generators
Low Cost Generators
Small Loads
Large Loads
A
B
ACCC Regulation Conference 2010- Steve
Edwell
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Chart 2(a)
High Cost Generators
Low Cost Generators
Small Loads
Large Loads
A
B
New Generator
ACCC Regulation Conference 2010- Steve
Edwell
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Chart 2(b)
High Cost Generators
Low Cost Generators
Small Loads
Large Loads
A
X
B
New Generator
ACCC Regulation Conference 2010- Steve
Edwell
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Chart 3
High Cost Generators
Low Cost Generators
Small Loads
Large Loads
A
Price Region 1
X
New Generator
ACCC Regulation Conference 2010- Steve
Edwell
B
Price Region 2
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Chart 4
High Cost Generators
Low Cost Generators
Small Loads
Large Loads
A
X
B
New Generator
Price Region 1
ACCC Regulation Conference 2010- Steve
Edwell
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Locational Signals for Generation and
Transmission investment
• Question:
Do we need better regulatory incentives
for TNSP’s, some exposure to transmission
costs by generators, or a return to some form
of central planning; or perhaps a mix of these?
ACCC Regulation Conference 2010- Steve
Edwell
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Locational Signals for Generation and
Transmission investment
• NEM Framework:
– Generators pay direct connection costs and loss
factor location signals
– But these signals are weak
– No location price signals
– Mis-pricing/disorderly bidding
ACCC Regulation Conference 2010- Steve
Edwell
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Chart 5
Output of Kogan Creek and imports into Qld across QNI (1)
800
QNI imports (MW)
700
600
500
400
300
200
100
0
0
100
200
300
400
500
600
700
800
Kogan Creek's output (MW)
ACCC Regulation Conference 2010- Steve
Edwell
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Chart 5a
Output of Kogan Creek and imports into Qld across QNI (2)
800
QNI imports (MW)
700
600
500
400
300
200
100
0
0
100
200
300
400
500
600
700
800
Kogan Creek's output (MW)
ACCC Regulation Conference 2010- Steve
Edwell
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Locational Signals for Generation and
Transmission investment
• Recent NEM policy initiatives in response to
remote generation:
– Remote generation zones (Scale efficient network
extensions – SENEs)
– Individual generators will pay only their own
efficient network connection costs
– Users will assume the risk of non arrival
– Regulatory oversight of SENEs costs by AER.
ACCC Regulation Conference 2010- Steve
Edwell
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Locational Signals for Generation and
Transmission investment
• Recent NEM policy initiatives in response to
remote generation (con’t):
Further recommendations:
– Introduce a transmission charge
– Pockets of material/transitory congestion should
be priced
ACCC Regulation Conference 2010- Steve
Edwell
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Locational Signals for Generation and
Transmission investment
• The Western Australian WEM:
– Generators pay connection and costs of deep
network impacts
– Potential for recompensation
– Quantifiable net market benefits of the
connection can be offset
ACCC Regulation Conference 2010- Steve
Edwell
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Locational Signals for Generation and
Transmission investment
• Concluding Points:
1.
2.
3.
4.
We can’t rely on a market solution
Is better price signals part of the solution?
Better incentives for TNSP’s?
A role for (proactive) planning
ACCC Regulation Conference 2010- Steve
Edwell
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