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Market Overview
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Market Structure
In the context of Western Australia, all details provided here refer
to the South West Interconnected System (SWIS), which stretches from Kalbarri
north of Perth, to Kalgoorlie-Boulder in the Eastern Goldfields and south
to Albany. It represents 90% of the WA power market with total expected
generation capacity of 4115MW in 2007-08. The estimated 07-08 system peak
demand is just over 3800MW and is forecast to rise by 3.2% (120MW) per
year over the next 10 years.
Western Power Corporation, the previous integrated state owned utility,
was in April 2006 disaggregated into separate generation (Verve Energy),
retail (Synergy Energy) and networks (Western Power) businesses supplying
the SWIS, and the regional arm (Horizon Power) to supply the small North
West Interconnected System and non-interconnected power stations around
WA.
Alinta, which was split from Western Power's predecessor the State Energy
Commission of WA to supply the gas market, was privatised in 2002 and
is engaged in electricity retail and generation. It is building gas-fired
generation plant in the SWIS. Besides Synergy and Alinta, Perth Energy
is the only other electricity retailer licensed to supply small-use customers
(as defined by regulation) in the SWIS.
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Click for enlarged view of SWIS.
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Market Design
The current market arrangements in WA commenced in September 2006. The model
differs from the National Electrcity Market (NEM) by being a net pool based
on separate capacity and energy markets. It is governed by the Wholesale Electricity
Market (WEM) Rules 2004 as administered by the WA Independent Market Operator
(IMO). WA is not interconnected to the NEM and will not be in the foreseeable
future.
The WEM's capacity market is based on a system of capacity credits allocated
by the IMO to all generators in the SWIS. Capacity must be certified by the
IMO in order to receive the credits, which are a form of guaranteed capacity
payment made by either contracted customers or the IMO. Energy is traded in
the Short Term Energy Market (STEM), a net pool arrangement in that it is used
mainly for trading uncontracted energy that is generated beyond the bilateral
contract arrangements between generators and retailers/loads.
All retailers and independent users must purchase capacity credits to match
their peak demand plus a reserve capacity margin set by the IMO. This ensures
sufficient capacity will be installed for the forecast peak demand in future
years which the IMO issues annually. This model eliminates the requirement for
extreme spot energy prices to signal the need for new capacity entry (as in
the NEM). STEM prices are therefore capped at lower levels than in the NEM,
at $150-250/MWh for gas fired and $300-600/MWh for liquid fired energy.
For further details see www.energy.wa.gov.au
and www.imowa.com.au
Consumers
The number of contestable customers is approx 12,500, out of a total SWIS customer
base of 850,000. The contestable load demand threshold is 5.7kW, or 50,000kWh
per year in consumption, about the size of a suburban deli. This market represents
roughly two-thirds of total SWIS demand in volume and value terms, or about
$1 billion.
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