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The National Electricity Market

 

All states except Western Australia and the Northern Territory are connected to the eastern grid and electricity can flow forwards and backwards across state boundaries according to demand and supply.  This pool of suppliers, thus created, forms the National Electricity Market (NEM).  This functions as a central dispatch system and is managed by the Australian Energy Market Operator (AEMO).

The NEM is a wholesale market through which generators and retailers trade electricity. There are six participating jurisdictions (five states and the ACT) linked by transmission network inter-connectors.

The electricity price in this market place is governed by demand and supply within wide limits.

Based on the generator’s offers to supply and the prevailing demand AEMO’s systems determine the generators required to produce electricity based on the principle of meeting the retailers’ demand in the most cost-efficient way. AEMO then dispatches these generators into production.

The dispatch price between the market and generators is struck every five minutes and averaged to the NEM spot price every half hour for each of five generation regions. This price fluctuates very substantially according to season and time of day with additional variability due to sun, wind, or rain and even what’s on TV.

The Australian Energy Regulator monitors the market to ensure that participants comply with the National Electricity Law and the National Electricity Rules.  These rules set a maximum spot price of $12,500 per MWh.  The prevailing weekly spot price can be seen on the AEMO website.   At the time of writing this is averaging $66.52/MWh in NSW post carbon tax.  But this week there were fluctuations as low as $41 and as high as $290.

 

 

Electricity consumption

The industry often tells us about new initiatives in terms of how many households they can support.  But households consume less than a quarter of the electricity delivered in Australia.  Most of the increase in the cost of electricity is borne by industry and commerce.  In due course this cost ends up in our wallets in other ways.

  

Electricity consumption by sector 2009
  Final
Consumption
(GWh)
Residential Commercial
and Public
Services
Industry Transport Agriculture
Forestry & Other
Per Capita Consumption (MWh pa)
Australia                     213,773 22.7% 21.4% 36.0% 1.1% 0.7% 9.43
United   States                   3,642,203 32.3% 31.3% 18.9% 0.2% 3.5% 11.60
Germany                      495,573 24.0% 22.4% 34.8% 2.7% 1.5% 6.05
France                      423,440 33.0% 23.2% 22.4% 2.4% 1.0% 6.48
United   Kingdom                      322,417 32.4% 23.6% 25.9% 2.3% 1.0% 5.18
Spain                      255,368 24.3% 27.9% 33.0% 1.1% 3.0% 5.53
Sweden                      123,374 29.0% 18.9% 36.4% 1.7% 1.3% 12.99
Switzerland                        57,483 27.0% 26.1% 27.5% 4.6% 1.5% 7.23

 Source: IEA - International Energy Agency

Notes:  

  • Since 2009 several Australian aluminium smelters have closed or reduced production.  The proportion or electricity consumed by industry will be less than it was then.
  • Final Consumption is electricity delivered to the home market after imports and exports, losses and the electricity industry's own use have been deducted.
    Australian losses are amongst the highest in the world due to our long transmission distances and our use of pump-storage for load smoothing.

 

 

 

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