AEMO proposes short term forward market

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The Australian Energy Market Commission (AEMC) has released a consultation paper on the Australian Energy Market Operator’s (AEMO) proposal of introducing a short term forward market enabling participants to contract for electricity in the week leading up to dispatch.

The paper is part of the AEMC’s system security and reliability action plan.

By allowing the trading of electricity contracts closer to real time, the new AEMO-operated platform could give participants greater price certainty and more options to manage financial risks. AEMO proposes that this could particularly benefit:

  • Demand response providers – giving them more confidence in their offers to reduce their demand in response to high price events, and more options for managing their exposure to high spot price events
  • Intermittent renewable generators – so they can offer electricity contracts to the market when they have greater certainty of what they will be generating
  • Gas fired generators – providing short-term price certainty when purchasing gas from gas markets.

The consultation paper is seeking stakeholder feedback on the proposal including:

  • How is short term risk currently managed in the national electricity market, and would a short term forward market be beneficial
  • What design elements should be considered as part of a short term forward market
  • How significant are the implementation costs and what other implementation issues should be considered in the rule change assessment.

Submissions on the consultation paper are due by May 23, 2019.

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