The head of the panel charged with proposing a fundamental reform of the national electricity market to make it fit-for-purpose for a renewables dominated grid says he is keen to make some early recommendations.
Tim Nelson last November was appointed by federal and state energy ministers to head the review into the National Electricity Market – now commonly referred to as the Nelson Review. It is due to deliver a draft report by the middle of the year, and final recommendations by the end of 2025.
But Nelson says some changes are urgent, because of the rapid changes on the main grid, as new capacity and new technology displaces legacy investments.
“We’re at an inflection point,” Nelson says in his first major interview in the latest episode of Renew Economy’s weekly Energy Insiders podcast.
“We’ve had a whole bunch of of new resources come into the energy sector. And timing is everything. We’re at a point now where you’ve got all of these distributed energy resources coming into the market, great opportunities for demand response and getting consumer participation to that next level.
“I think what the state and federal energy minister are after from us is actionable recommendations, so things that could be done reasonably quickly, that can can make a real difference to to, I guess, getting the best outcome for consumers.”
The four-member panel led by Nelson, supported by staff from government departments and those seconded from energy agencies, are now working their way through more than 100 submissions filed as part of their first call for ideas and input into the new market design.
Nelson tells Energy Insiders that several major themes have emerged – around tenor (the length of contracts signed by utilities with wind, solar and storage projects), consumer energy resources (rooftop solar, battery storage and EVs), and market signals for both capacity and grid services.
“If I had to summarize it, I’d say that tenor issue is coming up as an issue across some submissions,” Nelson says.
“The other issue you’ve got is, is that coordination problem, making sure you’re getting least cost across all of the different things that the market requires. And then the third big one is unlocking that potential for consumer energy resources.”
Tenor is important because it has a major influence on the ability of project developers to land sufficient finance to go ahead with their investments. The longer the tenor, the better. But many utilities and customers are reluctant to commit too long because of long term uncertainties.
Providing market signals and grid services has also proved an intractable problem with previous attempts to modify the market rules. Nelson says recognising the important of grid services will be one of the main focuses of the grid, and for maximising the use of existing capacity, possibly even without a capacity market per se.
But the issue of CER is also going to be a major focus, and one that will impact consumers most because, according to most scenarios, they will end up owning most of the resources available to the grid in the form of their rooftop panels, their household batteries, and their electric cars. And when and how they use or offer these resources will be crucial.
Nelson says most of these resources are still being run in “very simplistic” manner.
“I use myself as a really good example of, you know, what not to do,” he tells Energy Insiders.
“I have a battery at home, and my battery basically soaks up my solar and then deploys it back into my own house at night, just trickling it down as I use energy at night.
“Now, that’s not the optimal use of of my battery. My battery would be far better off reducing the overall system cost by deploying at times where the value to the system is a lot higher than the value to just me personally.
“And so I think that the challenge that the panel has is, how do we make sure that that customers are enabled to get into that in a little bit more of a flexible way that allows them to not just privately benefit, but to make sure that the system benefits as well.
“And I think that’s where the success for for that type of technology is not only ensuring that private owners of batteries benefit from them, but that the system benefits as well.
“And I think there are some some things that we can think about there. But, again, it’s early days, but, but anyone’s views on that, that that are kind of relevant to that kind of thinking. Again, we’d be really open to continuing to hear from people on that.”
Nelson says there has been some positive input into how CER can be integrated into the wholesale market with the help of new enabling technology in a way that can ensure consumers will benefit.
He is also keen to explore the so far untapped potential of demand response.
“We think of a future where you’ve got so much more consumer energy resources deployed through the grid, and you’ve got new investment in energy loads that are effectively going to be far more flexible than they were in the past,” he says.
“The easiest kind of way to think about this is that we’ve got this great opportunity to improve capacity utilization in the generation fleet, but also in the networks, and that if we do it right, that should lower the cost of energy for everybody.”
You can listen to the full interview in the latest episode of the Energy Insiders podcast here. See: Energy Insiders Podcast: Market changes could come quickly
