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A few interesting points about the NEM that help explain why it's avoided a simple situation. 1: There are multiple price caps that set a maximum price on ener
by ezzaf 5y ago
A few interesting points about the NEM that help explain why it's avoided a simple situation.
1: There are multiple price caps that set a maximum price on energy.
2: There's a commonly traded instrument that effectively acts as an insurance product for retailers against high prices. This means peaking generators get paid every quarter, even if they plants don't run at all.
3: The Australian government is spending billions building pumped hydro and gas generators to ensure supply over and above what the private sector is willing to fund.
- asdfaoeu 5y agoFor 1 doesn't ERCOT also have a maximum price or do you mean at a retail level? I'd imagine our relatively milder climate also has a lot to do with it.
- caf 5y agoERCOT has a wholesale spot price ceiling of US$9,000/MWh. (The NEM has a wholesale spot price ceiling of AU$15,000/MWh, US$10,732 at current exchange rates or US$10,245 in PPP terms).
- ezzaf 5y agoERCOT has a price cap similar to the NEM, but as far as I am aware no equivalent to the Cumulative Price Threshold which limits how long the price can sit at market cap for. In the NEM roughly speaking after 7.5 hours the price gets dropped to back to $300 for 7 days. This measure does get triggered occasionally, generally after transmission or generation failures combined with hot weather.
- caf 5y agoThe Texas problem was persistent, insufficient supply - the extreme pricing was just a symptom of that. Do participants in ERCOT's system not trade energy swap contracts? Why? None of that new pumped hydro is online yet though - existing pumped hydro capacity in the NEM is minor (essentially only Tumut and Wivenhoe). One reason that the NEM has been fairly robust might be that it is divided into regions with only moderate-capacity interconnects, such that each region is managed to be able to "stand on its own".