ESB releases ‘high-level design paper’ for Capacity Mechanism

Along with the ACCC’s release today, the other significant release (at least thus far today!) has been from the Energy Security Board (ESB) with their high-level design of the proposed Capacity Mechanism:

Accompanied with the 84-page document was this media release, which notes…

‘The proposed high-level design outlines the ESB’s preferred approach to key design choices, including:

• who is eligible to participate,

• the degree of centralisation of forecasting and procurement,

• the nature of the obligation placed on capacity providers in return for a capacity payment,

• the role of interstate trade, and

• how costs are passed through to customers.’

Submissions on the paper are due by 25 July 2022, with details of a stakeholder webinar to be confirmed and circulated in the coming days.

(A)  Prior discussion on WattClarity

We’ll review this with keen interest.

I’ve had concerns about capacity markets for many years … it was in March 2015 that I raised some here in ‘Is the changing generation mix in the NEM requiring it to start making capacity payments?’ for instance.

… some other articles are tagged ‘capacity payments’.

However at the same time we have been increasingly concerned about whether the ‘energy-only’ market is sustainable … especially given the ongoing ‘schism’ that has emerged between ‘Anytime/Anywhere Energy’ and ‘Keeping the lights on services’ that we outlined in the GRC2018 and expanded further on in GenInsights21.

1)  Within GenInsights21 it is Appendix 15 that particularly drills into some detail of the underlying challenge that … and perhaps points to some answers to the question about why its focused on fully dispatchable plant (noting that other mechanisms might be provided for ‘Anytime/Anywhere Energy’).

2)  Following on from that, it’s Appendix 16 that points to one of the underlying challenges facing the full suite of fully dispatchable services:

(i) these are all of those counted under ‘Aggregate Scheduled Target’ in both those appendices.

(ii)  to some extent, the whole debate about whether coal is in or coal is out is a distraction, and could well derail the underlying driver for needing something to address the challenges presented by ‘Anytime/Anywhere Energy’ .

3)  For a small excerpt of what’s in both of these appendices, watch this presentation to the Smart Energy Council

4)  But remember that there is so much more … and so much more reason why you can benefit from what’s in GenInsights21:

Will look forward with keen interest to seeing what is in the submissions!

(B)  Media coverage

In a quick scan now I have seen a number of articles including

1)  In the AFR:

(a)  I saw AEMC Chair Anna Collyer wrote the opinion piece ‘Capacity mechanism will speed up net zero transmission’.

(b)  A combination of journalists contribute ‘tension over energy crisis plan as ESB backs coal and gas back-up’.

(c)  Jennifer Hewett wrote ‘New tripwire for power politics’.

(d)  There’s also the AFR view noting ‘capacity mechanism must avoid another energy crisis’.

2)  In the Australian:

(a)  Perry Williams today wrote ‘Coal, gas payments for reliable power fix’.

(b)  This followed last Friday when Perry wrote ‘No coal in capacity mechanism, confidential sector polling by ESB finds’.

3)  In the Guardian:

(a)  Peter Hannam wrote ‘Stakes never higher – energy board releases capacity market blueprint’.

4)  In the SMH:

… did not see anything in quick scan in middle of the day

5)  In RenewEconomy:

(a)  Giles Parkinson wrote ‘Coal included in re-heated proposal for controversial capacity payments’

(b)  David Leitch asked ‘Why isn’t the ESB designing a policy to bring on bulk renewable energy?’

6)  In PV Magazine:

… did not see anything in quick scan in middle of the day

7)  In EcoGeneration:

… did not see anything in quick scan in middle of the day

If time permits, will keep updating the above (or feel free to add as comments below).