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16RENEWABLE ENERGY AND THE ELECTRICITY MARKET IN WESTERN AUSTRALIAOFFICE OF ENERGYRENEWABLE ENERGY HANDBOOK 20102.1 IntroductionWestern Australia’s electricity industry has changedsignifi cantly over recent years from a State-owned,vertically integrated monopoly to a competitivemarket. This section provides a brief background ofthe past and future arrangements for the electricityindustry, and the implications for renewable energy.2.1.1 BACKGROUND – CLOSED MARKETUntil 1997, the State Government had an effectivemonopoly on the electricity market, with theexception of some self-generators on the SWIS andin remote locations of WA. In 1995 the State EnergyCommission of Western Australia (SECWA) was splitinto two, Western Power Corporation was allocatedresponsibility for electricity-related functions andAlinta for gas-related functions. Western PowerCorporation was then the State’s major generator,transmitter and retailer of electricity.2.1.2 WESTERN AUSTRALIA’SELECTRICITY REFORMFrom 1997 to 2006 there was a gradual deregulationas the electricity market was opened up to competitionwith new generators and retailers. The contestabilitythreshold has been progressively reduced to 50 MW.hper annum (from 300 MW.h per annum). Electricityconsumers above this threshold are able to purchaseelectricity from any supplier.In 2004 the Electricity Network Access Code wasestablished as the new regulatory framework tofacilitate third party access to covered networks.Western Australia’s electricity reform process resultedin the disaggregation of Western Power Corporationon 1 April 2006. Four separate Government-ownedelectricity corporations were established:Synergy, retailer;·Verve Energy, generator;·Western Power, network service provider; and·Horizon Power, vertically integrated utility·for supply outside the South WestInterconnected System.The objective was to create a competitive electricitymarket to encourage private sector investment,improve reliability of supply and place downwardpressure on prices.This led to the establishment of the WholesaleElectricity Market (WEM). The WEM consists of threecomponents – The Reserve Capacity Mechanism,the Short-Term Energy Market and the BalancingMarket. The energy trading component of the WEMcommenced operation in September 2006.2.1.3 MARKET POWERMITIGATION MEASURESThe break-up of a State-owned monopoly utility stillleft the new Government entities with considerablemarket power. In recognition of this, the reformprocess also implemented a range of measuresto mitigate the potential for abuse of market powerand to support the development of a more competitiveelectricity market. Specifi c measures include:Restricting Synergy from generating electricity·and Verve Energy from retailing electricity until2013 with the potential to extend this to 2016;Capping Verve Energy’s fossil fuel generation·capacity to 3000 MW; andThe establishment of vesting contract arrangements·for the wholesale supply of energy and CapacityCredits between Verve Energy and Synergy thatdiminishes over time.Further information on the Vesting Contract and itsarrangements can be found at: www.energy.wa.gov.auCapacity Credits are discussed in Section 2.2.6.
2.2 The WholesaleElectricity Market2.2.1 INTRODUCTIONThe Wholesale Electricity Market consists of threecomponents, the Reserve Capacity Mechanism (RCM),the Short-Term Energy Market (STEM) and theBalancing Market. The Independent Market Operator(IMO) has the responsibility to operate and administerthe WEM, supported by the Market Advisory Committee,an advisory group of industry representatives.The monitoring and surveillance of the functions ofthe overall market is undertaken by the EconomicRegulation Authority (ERA).2.2.2 INDEPENDENT MARKET OPERATORThe IMO administers and operates the WEM inaccordance with the Wholesale Electricity MarketRules (the Market Rules). The Market Rules coverthe roles and functions of the IMO and other marketgovernance bodies, and guide the operation of themarket (including the trading and dispatch of energy,the reserve capacity mechanism and settlement).The Market Rules are available at:www.imowa.com.au/market_rules.htm.2.2.3 WHOLESALE BILATERAL CONTRACTSBilateral contracts are the major mechanism fortrading energy in the SWIS. Bilateral contracts arecommercial agreements formed between electricitygenerators and retailers or large energy users forthe provision of energy.Each day market generators are required to providesubmissions to the IMO, indicating the level of bilateralcoverage for the next trading day. This informationis used for the next day’s scheduling of electricitygeneration. Generators are required to follow theirschedule, unless they are intermittent generators,such as wind farms. Intermittent generators mayspill their entire output into the market, receivingbalancing payments for all electricity generated.Outcomes from MAC REWG program may affectthe spill arrangements for intermittent generators.OFFICE OF ENERGYRENEWABLE ENERGY HANDBOOK 20102.2.4 THE SHORT-TERM ENERGY MARKETComplementing wholesale bilateral contracts is theSTEM. The STEM is an energy-only forward-lookingmarket operated by the IMO each day to facilitatetrading around bilateral contract positions. The primaryrole of the STEM is to provide a mechanism for energytrade between market participants. This allows thosetrading under bilateral contracts to change theirposition, while also allowing those not trading underbilateral contracts to participate in the market.The STEM exists to allow participants to eithersell any excess generation capacity that they have,or purchase extra energy at specifi ed times of theday. Participation in the STEM is open to all marketparticipants, but is not compulsory.17RENEWABLE ENERGY AND THE ELECTRICITY MARKET IN WESTERN AUSTRALIA
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Page 3 and 4: ForewordOFFICE OF ENERGYRENEWABLE E
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Page 21 and 22: System ManagementSystem Management
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Page 33 and 34: Entry on the National Heritage list
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Page 39 and 40: 3.5.7 DISPUTES OVER NETWORK ACCESSI
Page 41 and 42: 3.6 Other Approvals -Wave Energy Ap
Page 43 and 44: 3.8 Operational Approvals -Electric
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Page 47 and 48: A 1.1.4 SPECIFIC CONSIDERATIONSWind
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Page 53 and 54: A 1.7.3 TECHNOLOGIESHot rock proces
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Page 59 and 60: The WA Geothermal Centre of Excelle
Page 61 and 62: A 3.1 Useful ContactsOFFICE OF ENER
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A 3.5 Geographic InformationSystem
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OFFICE OF ENERGYRENEWABLE ENERGY HA
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TERMGasifi cationGasoholGreen Power
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Office of EnergyLevel 9Governor Sti
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