Post: Australia updates market rules to reduce power outage potential

Australia updates market rules to reduce power outage potential

The Australian Energy Market Commission (AEMC) has announced rule updates to the National Electricity Market, aimed at mitigating the risk of power outage as the country transitions from coal-fired generation to increased reliance on renewables.

Analysis by the AEMC has identified that current market price settings are too low to ensure an adequate electricity supply during the transition. With the forecasted exit of 60% of coal generation by 2030, there is a reliability risk in some regions – with AEMO’s latest Electricity Statement of Opportunity update showing New South Wales and Victoria will begin to experience reliability pressures between 2025 and 2028 without new investment.

To address this, on 7 December AEMC announced that a rule change would be implemented to incrementally raise the Market Price Cap, Cumulative Price Threshold, and Administered Price Cap. These changes aim to provide greater flexibility for investors to contribute new generation and storage during periods of high demand and emergency situations, ultimately enhancing system reliability.

Under the new rule:

• Market Price Cap: Set to increase from $16,600/MWh to $22,800/MWh by 1 July 2027
• Cumulative Price Threshold: Rising from 7.5 hours at the Market Price Cap to 8.5 hours by 1 July 2027
• Administered Price Cap: Fixed at $600/MWh from 1 July 2025

While these changes are expected to result in a modest 3% increase in retail electricity prices by 2027, they are designed to have minimal impact over 99% of the time. The adjustments are anticipated to lower long-term prices for consumers, ensuring a stable and reliable electricity system.

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