Globally-experienced Corporate Affairs leader | AuDHD and EDS advocate | Raising two outstanding little boys | Driving equity and sustainability in a complex stakeholder landscape #WeAreTheRenewableGeneration
🔍A Not-An-Engineer’s Guide to Australia’s Energy Future: Part 2 Cutting through the noise and the rhetoric to explain what makes our grid tick—and where it’s headed—in language we can all understand. In Part 1, we talked about how baseload generators, like coal plants, are great at producing lots of energy all the time but really struggle to respond when demand fluctuates. If you missed it, check out my previous post. Now let’s dive into Australia’s National Electricity Market (NEM) to learn how energy is priced, and how the inflexibility of Big Baseload can drive up your power bill. ⚡The NEM’s Auction System and Pricing Dynamics 💸 The NEM uses a five-minute 'auction' system to ensure energy supply meets demand at the lowest possible cost to the consumer. Here’s the gist: every five minutes, the market operator (our friends at the Australian Energy Market Operator (AEMO)) forecast the spot market, or the energy load in the NEM, for the next five minutes. Then, power generators of all kinds (renewables, gas, coal) submit bids to supply that demand. AEMO accepts the lowest bids first, setting the final price based on the highest bid needed to meet demand. Five minutes later, we do it all again. So, what happens when renewables, with their low operating costs, are bidding alongside baseload generators with high fixed and fuel costs? Renewables like solar and wind cost little to operate once built, so can even afford to bid in at zero dollarbucks (there you go, Zoe Kemp) during low demand periods. 💡 Supply, demand, and negative pricing As we established in Part 1, supply and demand in the grid must always balance. When there’s more energy being generated than the system needs, prices can go negative. This often happens in periods of low demand (like during the day when rooftop solar is pumping but household demand is low). In this scenario, inflexible baseload plants often have to pay to offload generation they can't just switch off. Kind of like when you over-cater for an event and are left desperately trying to palm off half-eaten charcuterie boards to all your mates because that cheese alone cost $20 and you've already eaten your weight in prosciutto di Parma. 🤔 What this means for consumers? Negative pricing sounds good for consumers, right? Not quite. Ever heard of a not-for-profit coal, gas, or energy company? Me neither. Inflexible baseload generators have to recover these costs during periods of elevated demand, which impacts the market and often leads to higher costs downstream. Plus, all that excess power can reduce overall grid efficiency, especially if it leads to curtailing cheaper renewable energy. ☢ Up next in this series: a deep dive into small modular reactors—distilling fact from fiction from both a system and economic perspective. Are they the game-changer we've been waiting for, or just another piece in an evolving energy puzzle? Let’s find out. #EnergyFuture #AustraliaEnergy #NEM #Renewables #ElectricityPricing
