Margin Peak/Off Peak Parameters – Wholesale Electricity Market

ERA – Economic Regulation Authority

Dec 24
Margin Peak/Off Peak Parameters – Wholesale Electricity Market

On 24 December, the Economic Regulation Authority (ERA) published an issues paper on the proposed Margin Peak and Margin Off-Peak parameters to apply for the period 1 July 2016 to 30 June 2017.

The Wholesale Electricity Market Operator (formerly the Independent Market Operator and from 30 November 2015 the Australian Electricity Market Operator [AEMO]) submitted its proposal to the ERA on 27 November 2015 and the ERA has until March 2016 to determine the margin values.

As part of its determination, the ERA is seeking public consultation on the proposed margin values, with submissions to be received by 1 February 2016.

For 2016/17, the ERA notes that the proposed margin values have reduced and the total availability cost to be paid to the provider of spinning reserve has increased as shown below.

Margin Values Proposed for 2016/17 Current 2015/16
Margin Off-Peak (%) 35 51
Margin Peak (%) 24 36
Average annual spinning reserve capacity – Off Peak (MW) 191.9 178.4
Average annual spinning reserve capacity – Peak (MW) 218.1 208.8
Estimated annual availability cost ($M) 10.55 8.32
System Marginal Price – Off-Peak ($/MWh) 36.17 32.98
System Marginal Price – Peak ($/MWh) 52.97 47.23

Synergy is the default provider of spinning reserve with the margin values determined to cover the availability cost and loss of efficiency from Synergy backing off generators to provide the spinning reserve ancillary service and so no longer being able to generate and sell electricity from these generators into the market.

Changes to the variables in the calculation for 2016/17 include:

  • higher modelled ‘balancing price’ as higher cost generation dispatched with future closure of Worsley co-generation and Geraldton Gas Turbine;
  • an increase in average spinning reserve requirement in both peak and off-peak periods because Collie is running at a higher overall capacity factor to partly fill the gap left by the Worsley cogeneration unit (when Collie (which has the highest output in the system) turns up, the spinning reserve requirement increases in that interval);
  • greater contribution to spinning reserve by Load Following Ancillary Services (LFAS);
  • additional spinning reserve available at lower unit price from NewGen Kwinana Closed Cycle Gas Turbine;
  • expiry of existing spinning reserve contracts (13MW each from Bluewaters and SIMCOA) at end of June 2016; and
  • removal of a couple of previous transmission and stability constraints from the model.

The calculation used to determine margin values is the same as was utilised in calculating values for the 2015/16 period.