This article [except where indicated] is made up of passages from the June 2017 report of Independent Review into the Future Security of the National Electricity Market by Dr Alan Finkel AO.  It was compiled for Consumers SA by Executive Committee Member Brian Attwood.

Passsages are extracted from the sections of the report indicated by the bold headings.  Readers can download the full text of the report by clicking here

5. Improved System Planning.

It would appear more transmission networks than required have been built, adding to the cost of power.

The combined value of distribution network assets is $68billion. This is more than three times the value of transmission networks.

The Review Panel heard that recent investments in network assets were informed by inaccurate forecasts, which contributed to the networks being overbuilt, with consequent impacts on electricity bills.

Voluntary write-downs of assets values would have the effect of lowering prices for consumers, and reducing the size of the regulated asset base without increasing the risk profile of the investment.

However, given that there is a reasonable likelihood that some assets will be stranded (not being used) in the future, there is merit in a future examination of the most appropriate method for handling this issue in the long-term interests of consumers.

6. Rewarding Consumers.

[Brian Attwood comments that: retailers need to develop plans to allow consumers to participate in the market with solar panels and battery storage. Consumers cannot withstand the constant price increases way above the CPI]. 

Consumers have installed more than 1.44 million rooftop solar photovoltaic systems. The Australian Energy Market Operator (AEMO) forecasts that by 2036 the annual electricity generation from rooftop photovoltaic solar will increase by 350% from current levels.

Bloomberg ( Bloomberg New Energy Finance report ) expects the average payback period for residential consumers to fall below 10 years by the early 2020s, with around 100,000 battery storage systems to support rooftop solar photovoltaic generation predicted to be installed by 2020.

There is an ACCC special review of the electricity retail market with a preliminary report expected by September 2017, and the final report in June 2018.

Consumers should have access to their electricity consumption data in real time. They should also have control over who, if anyone, can access that data.

A key protection for vulnerable consumers is the requirement for retailers to develop and maintain a consumer hardship policy that sets out their approach to identifying and assisting consumers who are having difficulties in paying their electricity bills. Governments also offer a range of concession programs to assist consumers. In South Australia 1.8% consumers are on a hardship program but interstate it is only 1%.  South Australia also has the highest disconnections at 1.4% for non payment.

At the moment there is no legally enforceable Australian Standard for the safety of lithium ion batteries and no requirement that consumers use an accredited installer for the installation of battery storage devices.

The Australian Energy Market Commission (AEMC) is also considering some of these issues as part of the current rule change on the contestability of energy services, including whether there would be merit in moving to a regime where network businesses’ revenues are based on a single estimate of their efficient total expenditure(totex) rather than having separate treatment of capital expenditure (capex) and operating expenditure(opex).

Recommendation 6.9

By mid-2018 the COAG energy council should direct the Australian Energy Market Commission to undertake a review of the regulation of individual power systems and microgrids so that these systems can be used where it is efficient to do so while retaining appropriateconsumer protections.

The Australian Energy Market Commission should draft a proposed rule change to support this recommendation.

Another area of concern is new buildings that are built on cost and do not consider energy efficiency long term costs.

Recommendation 6.10

Governments should accelerate the roll out of broader energy efficiency measures to complement the reforms recommended in this review.

7. Stronger Governance.

Present arrangements complicate the question of accountability for system out comes in the NEM, largely because of our federal arrangements and allocation of regulatory and operational responsibilities. When high-profile events occur in the NEM and amid the intense debates that follow, it is difficulty for community to understand who is responsible and accountable.

The Panel recommends the strategy be developed in a phased approach. 

Phase 1: The initial program of work should include:

  •  A rigorous gap analysis, to be undertaken in consultation with industry and other relevant stakeholders.
  • It should consider whether additional measures are needed in terms of market bodies’ powers to collect and share information (for example, whether there is a need for a formalised agreement between market bodies and government agencies explicitly detailing information sharing arrangements); the effectiveness of data sharing in operational systems in terms of managing future challenges and supporting innovation; and the publication of other relevant data sets.An initiative to develop a catalogue of energy market data and publications. This will help overcome the barrier of not knowing what information is available, who publishes it, and where to get it. should be considered as the platform for this resource.

Phase 2: A medium-term program of work to enhance and consolidate existing data platforms and disseminate up-to-date information in three ways:

  • A dashboard that provides transparency on the performance of the NEM against security and reliability, affordability and emissions reduction objectives, allowing progress to be tracked. The dashboard would be a ‘single source of truth’ for this information. It should be easy to navigate, and combine high-level information with the ability to drill down to specific areas.
  • An ongoing Energy Use Data Model. This will support AEMO with demand forecasting as well as helping new entrants to assess market opportunities.
  • A mapping platform that provides a single view into the NEM in terms of generation, networks and consumption, to allow new opportunities to be more easily understood. It should combine the features of the Energy Use Data Model, AREMI and AEMO’s interactive map of planning information to provide detailed spatial information regarding predicted generation opportunities, network constraints, expansion plans and support requirements. All network operators should be incentivised to maintain up-to-date information about constraints and opportunities that are forecast to occur in their network.

Phase 3: A longer-term process whereby stakeholders can request access to non-public data for research and development purposes. 

  • This process will ensure that unanticipated future needs can be met and future innovation supported. It must consider the benefits of the work that the data would enable, the potential risks to privacy, security, and any existing commercial confidentiality agreements, and the costs of making it available.

8. Beyond the Blueprint.

In this sector new technologies are considered.


High-efficiency, modular systems, such as diesel generators, offer a technology pathway to substantially increase the efficiency of electricity generation from a range of fuels. Current research is developing low cost fuels from coal and biomass that are suitable, with appropriate fuel injection and engine modifications, for use in diesel engines at scales up to approximately 100 MW. For distributed coal and biomass applications, Direct Injection Carbon Engine (DICE) technologies offer reductions in CO2 emissions of up to 50 per cent over conventional applications through efficiency gains alone.

Gas alternatives

As discussed in Chapter 4, gas-fired generation has an important role in contributing to the security and reliability of the NEM and emissions reduction. Over time, as Australia transitions to lower emissions generation, natural gas may be replaced by zero emissions fuels such as hydrogen and biogas. The potential of hydrogen and biogas to be used in place of natural gas in existing electricity infrastructure (combustion gas turbines)is being explored.

Energy storage technologies

Electricity cannot be stored in its own right – it must be consumed as it is generated. However, electricity can be converted into other forms of energy that can be stored, such as the chemical energy stored in batteries.

Energy storage technologies can provide solutions to many of the reliability and security challenges facing the NEM as it transitions to a more variable, non-synchronous and distributed generation mix. From a reliability perspective, electricity can be stored at times when electricity is cheap and supply is high, including when excess electricity is being produced by variable renewable electricity (VRE) generators. It is then discharged at times of peak demand, or times of low supply from VRE generators. Storage technologies can also support power system security, by storing or discharging energy in a way that provides services such as frequency control (including ‘fast frequency response’) and voltage control.

The amount of energy that can be stored, and the efficiency losses associated with storage, differs across technologies.  

Some technologies,such as pumped hydro, have the capacity to store large amounts of energy (multiple GWh), while others, such as batteries, can store small to medium amounts of energy (hundreds of kWh or MWh). The rate that each system can discharge its energy is the power. Depending on the requirement, different combinations of power (MW) and energy (MWh) can be implemented. With current technology, no single storage medium has the characteristics to meet all the requirements for energy that the grid demands. A mix of storage solutions will likely be required to address all applications.


Batteries operate as energy storage devices that, when required, convert chemical energy into electrical energy. There are a large range of battery types based on different physical designs and chemistries such as lead-acid, nickel metal hydride, lithium ion and flow batteries, such as zinc-bromide. The characteristics of each type vary in terms of their power density (power to weight), voltage, allowable charge and discharge rates, cycle life and efficiency.

A substantial advantage of batteries is their scalability. They can be deployed from household scale (kWh) up to grid-scale (MWh and GWh), and can also be packaged for off-grid use by household, remote area, and commercial consumers. Another advantage is their rapidly falling prices and increasing availability.

The use of batteries is enhanced by their relatively fast discharge time, particularly when compared with large pumped hydro and thermal storage. This also means that when coupled with appropriate power conversion electronics, batteries are capable of providing a fast frequency response (FFR) service to support power system security. In Great Britain, the system operator has procured 200 MW of FFR from large-scale battery storage.

A disadvantage of batteries is their relatively limited life, which is in most cases less than 15 years. Some batteries are made from hazardous materials, making disposal and recycling difficult. Batteries are also sensitive to climatic conditions and require cooling in hot environments.444

Lithium ion batteries are highly flexible, with lower weight and volume than other technologies. Lithium ion batteries are being deployed for applications such as electric vehicles and grid power quality. Lithium ion batteries typically have high round-trip efficiency, between 85 to 98 per cent, with a typical discharge time from seconds to hours, but energy can be stored for longer periods.

They also have a very long lifetime compared to other battery technologies, with 5,000 or more charge cycles.

The potential for batteries to become widespread in Australia depends both on ongoing innovation in technology and changes to market mechanisms to reward investment. Regulatory reform could assist in rewarding consumers for additional services provided by battery storage. As discussed in Chapter 6, new approaches to aggregate and coordinate the efficient use of thousands of small-scale battery storage systems will be needed to derive the full value of the various services they can provide.

System security technologies

Synchronous condensers

A synchronous condenser is a machine similar to a synchronous generator or motor, having a large rotating mass that spins at a speed proportional to the grid frequency. It does not produce electricity. Instead its benefit is that, as a synchronous technology, it provides physical inertia to help dampen rapid frequency changes, fault current to help maintain system strength, and the ability to supply or absorb reactive power to help control voltage. Operating a synchronous condenser consumes only a very small amount of energy.

Synchronous condensers can be purchased as new, or reconfigured from decommissioned synchronous generators (such as coal-fired generators). Converting a decommissioned synchronous generator to a synchronous condenser may be an economical alternative to purchasing a new synchronous condenser. Cost-savings are achieved through re-using the existing generator machinery, foundation and building, auxiliary systems and grid connections. However, as system security needs are often location-specific, the viability of such a conversion will depend on the location of the decommissioned generator.

It is also possible to make modifications to synchronous generators that are still in operation, enabling them to be switched between generator mode and synchronous condenser mode. This approach has been employed in Tasmania, where there are 14 hydro generators capable of operating in synchronous condenser mode.

Synchronous condensers are a mature technology. There are a limited number of synchronous condensers in place throughout the NEM, though many have either been retired or are close to retirement, and traditionally were designed for voltage control rather than to provide inertia and fault level contributions.

Power Conversion Electronics

Wind turbines can provide an inertia-based FFR (also known as synthetic inertia) using the kinetic energy in their rotors. If their generation is curtailed below full capacity they can then provide FFR by increasing generation quickly when needed. Both wind and solar photovoltaic are able to provide reactive power and voltage control if designed to do so.

A recent example in Australia is Stage 2 of the Hornsdale Wind Farm in South Australia which has been licensed with higher connection standards than required under the National Electricity Rules. In accordance with the licence conditions, the wind turbine inverters installed have the capability to provide frequency control services to the NEM. In addition, the wind farm is designed to better withstand high rates of change of frequency.



AuthorRay Dennis