Graph of the Day: Why the NEM is broken | RenewEconomy

Graph of the Day: Why the NEM is broken

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Solar market expert says NEM is like the latest budget: “transparent for what it really is, suspicious and utterly lacking in vision.”

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As the Australian energy market slouches towards decarbonisation, one of the biggest drags on the transition is widely considered to be the state of its National Electricity Market.

As South Australia’s environment minister noted last week, while the NEM was a great piece of market reform for the 1990s, it’s not the 1990s any more.

Indeed, at the 2016 Solar and Energy Storage Conference in Melbourne this week, much discussion has centred around the urgent reform of the NEM that is required to facilitate even the minimum of Australia’s low-achieving climate commitments.

So what is wrong with the NEM?

According to solar industry expert Nigel Morris, plenty. “The NEM is like the latest budget,” Morris told the Australian Solar and Energy Storage conference in Melbourne on Thursday – “transparent for what it really is, suspicious and utterly lacking in vision.”

Morris had a lot to say about about what is wrong with Australia’s current electricity market. But in point form it goes something like this: lack of flexibility; staggering complexity that leads to perverse outcomes; unfathomable conflicts of interest (including links to state revenues); the use of “blanket rules” that inhibit the uptake of renewables; and increasingly angry consumers.

A lot of NEM’s biggest problems, he said, stem from the fact that the utilities and regulators didn’t see the solar PV juggernaut coming. And now that it has arrived, they’re still pretending nothing has changed.

But, of course, plenty has changed. More than $20 billion has been invested in installing solar PV over the past 10 years – a shift that has cost utilities $1 billion in annual revenue losses. And, as the blow chart shows, some 4.7GW of coal-fried generation has come off line since 2011, as the capacity of PV and wind has increased by roughly double that amount. As the chart says: “that’s gotta hurt”.

Screen Shot 2016-05-05 at 10.17.11 am

“Utilities didn’t think we’d have any impact on their industry,” he told the conference. “If that’s not having an impact, I don’t know what is,” he said.

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  1. harleymackenzie 4 years ago

    I think the graph is saying something important here but the presentation is nearly impossible to understand. There are two different axes with different origins and neither are labelled. I think the zero position on the left axis is non-renewable installed MW but that is a guess and the amount makes no sense and the right axis doesn’t really relate to the other axis.

    The message has to be really clear or you get misleading graphs that politicians use, such as:

    • CaresAboutHealth 4 years ago

      You can work out the scale of the LH axis by the comment “some 4.7GW of coal-fried generation has come off line since 2011.” This implies the LH axis represents the change in power generation (in MW), with coal-fired power generation falling by 4.7 GW. The green line is associated with the RH axis shows and wind and PV as a percentage of total capacity, reaching just of 20% in 2015-16.

  2. JeffJL 4 years ago

    Poor graph. Should have been in the Budget it is that bad.

  3. Cooma Doug 4 years ago

    You need to look a lot closer at the amazing ability of the NEM, in its present design, to manage system security, pricing on 5 minute turnover,
    and the management of various events before we decide its a fiasco.
    Indeed the NEM has the market tools to manage the revolution with erradication of supply distuptions.
    It will need to evolve as the changes go ahead. It will surprise the doubters.

    • Mike Dill 4 years ago

      Doug, I agree that the NEM has a role to play, and seems to be doing a good job given the current structure.

      Unfortunately the article did not go into ANY details, on the budget or describing the problems, which I found VERY annoying. Some links to the background information would have been good to see.

  4. Suburbable 4 years ago

    Two articles today help to place the incumbent’s mindset in perspective –

    From this article: “the NEM was a great piece of market reform for the 1990s”

    From another article: “Australia will be able to meet its Kyoto targets for 2020” (Kyoto was 1997).

    We can see that our current policy makers are happily entrenched in the 1990s.

    So much has changed since then that the model used for the NEM is so uninformed and dated that it makes it in need of an overhaul.

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