# Where do we start?

A response to the Independent Review into the Future Security of the National Electricity Market – Preliminary Report

## By Isha Deodhar

Households, businesses and industries must be supplied with electrical energy in a manner which is clean, cost effective and reliable. A nation’s ability to do 21st this is a key driver of its economic and social wellbeing. The century needs an energy market which is efficient and adaptable in the face of complexity and volatility. There is a vast body of literature, research, data, opinions, concerns and questions which make this challenge open ended and uncertain. Without a framework to consolidate and prioritise these, the task will be impossible. Hence, in an effort to answer the question ‘Where do we start?’, the following table describes some of the key trends which need to be considered. The impacts of these trends with respect to affordability, security and environmental sustainability, both positive and negative, are discussed. Based on this discussion, a few key solutions have been suggested.

Trends	Affordability	Security/Reliability	Environmental Sustainability	Solution
Shift towards using renewable energy (e.g. wind and solar) as opposed to traditional, coal or gas powered generation.	ü solar and wind powered stations are actually less expensive than coal powered generators hence as coal fired power generators close down or come to the end of their life, it is more economical to replace them with renewable generators. O It will initially cost more money to build renewable energy power stations since coal powered generators already exist and do	O Traditional coal or gas powered stations provided a source of synchronous power with inherent inertia. Renewables such as wind and solar are sensitive to weather patterns and hence generation levels for an individual station can be a lot more volatile	ü Reducing dependency on carbon based sources will have a significant impact on carbon emissions and therefore the enhanced greenhouse effect	Adding policy frameworks to the existing electricity and ancillary markets can achieve this. For example, a policy requirement on renewable energy generators for technology which can emulate the effects of inertia will create a huge interest in such products encouraging innovation, competition and lowered costs in this
Changing a centralised system with electricity generated in a few large scale stations to a decentralised system with many, smaller generators (e.g. rooftop photovoltaic cells in households)	ü Reduction in cost of transmission ü Key parties which traditionally did not have generational capacity (e.g. households) are now less reliant on paying retailers to provide them with energy. ü Moreover, if these parties should generate power in excess to their needs, they can sell this power on the energy market and make profits. O A more bidirectional flow of power to facilitate households being able to sell their energy requires changes in the physical grid (e.g. changing switches) which will incur costs. O Loss in the economies of scale produced when power is generated at a large scale site.	ü A more distributed system means that the system is less susceptible to changes in weather and the performance of any one given generator. O If not effectively managed, an increase in the number of generators and therefore players in the market may create volatility.	ü Distributed generation means that less energy is lost during transmission thus conserving energy	A transmission market - A mechanism by which energy companies and other investors can approach clusters of embedded generators or buildings considering embedded generation, agree to invest in the required changes to the network for these generators to be able to sell their electricity and in return can claim a fraction of the profits generated by these embedded generators.
Increased capacity to store power in times of excess supply to use in times of excess demand as opposed to needing excess stations which are turned on in times of excess demand	ü A reduction in the need for excess, back-up power plants means that costs which would otherwise go into building, maintaining and operating these plants can be saved. O Investments will be required to build and maintain storage facilities	ü Smoothening out volatility in the supply of energy will increase the security of the system	ü Reduced reliance on back-up power plants means that the natural resources going into them can be saved.	A Storage market – Mechanisms which will allow and encourage energy storage facilities to buy electricity during times of excess supply (like a consumer) and sell it during times of excess demand (like a generator). Guidelines will need to be determined to ensure that people requiring power in the present moment are prioritised over people buying power to store it.