IEEE Power & Energy Magazine - September/October 2021 - 31

providing efficient incentives for participants, real-time price
mechanisms facilitate the possibility of contracts for difference
and hedging to support long-term agreements and
risk mitigation. This is extensively conducted in the NEM
through hedging and swap contracts. NEM markets for system
services were set up with a similar commitment to realtime
pricing (for those services that were remunerated). The
NEM has six frequency response markets (frequency control
ancillary services): contingency frequency response raise and
lower services for 6-s, 60-s, and 5-min response times and a
causer-pays primary frequency response service. There are
nonmarket services for network support and control, such as
transient oscillation control, and system restarts.
Reflective of its smaller and more concentrated nature,
the WEM balances market efficiency with greater structured
procurement, including a capacity market (the reserve
100
150
200
250
50
capacity mechanism), a day-ahead energy market, the shortterm
energy market, and a real-time energy market with
30-min dispatching (with lower market price caps, currently
AUD$382-1,000/MWh). For system services, the WEM
prioritizes structured procurement via a regulation market
(load-following ancillary services) and other system services
procured under contract, including frequency response
(spinning reserve) and, like the NEM, similar nonmarket
services for network control and system restarts.
The Post-2025 Program
In 2019, Australian federal and state and territory governments
asked the ESB to advise on a long-term, fit-forpurpose
market design for the NEM that could be applied
starting in 2025 in response to the profound energy transformation
occurring across the country. The initiative has
30
20
10
(a)
(b)
1,000
2,000
-1,000
-2,000
-3,000
2016
Wind
Utility Solar
Distributed PVs
Actual Variable Renewable Energy Ramp
(c)
2018
2025
15
20
25
30
35
40
0255075
2019 (Actuals)
2025 (Integrated System Plan Central)
2025 (Integrated System Plan Step Change)
(d)
figure 1. (a) Operator directions in the NEM, showing that interventions are increasing. (b) A frequency distribution plot in the
NEM to 2019, demonstrating frequency control declined as a result of reduced primary frequency control. (c) A butterfly plot of
5-min net demand ramps, historical and forecast (maximum 5-min ramp in 2025 > 1.5 GW, maximum 1-h ramp in 2025 > 6 GW),
which shows that uncertainty is growing. (d) The forecast penetration of solar and wind as a percentage of underlying demand.
They may meet 100% of Australia's power demand by 2025. [Source: Adapted with permission from Australian Energy Market Operator
(AEMO) Renewable Integration Study, Stage 1, 2020, and AEMO Frequency and Time Monitoring Report, first quarter 2020.]
september/october 2021
ieee power & energy magazine
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100
Solar and Wind Penetration (% of Underlying Demand)
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
Net Demand Ramp (MW)
Directions (NEM)
Underlying Demand (GW)
Time (%)
2007
2011
2015
2019
Frequency (Hz)
50.15
50.1
50.05
50
49.95
49.85
49.9
IEEE Power & Energy Magazine - September/October 2021

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