Energy Market Reforms

Snippet: Australia’s Renewable Energy Challenge: Curtailment and Opportunity Australia is rapidly shifting to renewable energy, but curtailment - spilling wind and solar power due to grid limitations - remains a challenge. In his article [1], Daniel Mercer of ABC News examines this issue and its implications for our energy future Key Takeaways: 1. Grid Infrastructure and Curtailment: Australia’s renewable energy grid is expanding rapidly, but without sufficient infrastructure upgrades, a significant portion of this clean energy is being wasted. Investing in modernisation could reduce curtailment and unlock the full potential of renewables. 2. Coal Plants as a Barrier: Coal plants, due to their inflexible design, continue to limit renewable energy integration. As these plants retire, renewables will have more room to grow, though careful management is needed to ensure a stable transition. 3. Rooftop PV’s Role in Curtailment: While coal plants' minimum operational levels limit the grid's capacity for renewables, rooftop solar PV increases curtailment by reducing operational demand during peak generation. This growing impact underscores the need for better grid management and energy storage solutions. 4. Energy Storage as a Key Solution: Storage solutions like large-scale to EV's and household batteries are essential to shifting surplus renewable energy to periods of high demand. This will improve renewable efficiency and help balance energy supply. 5. Economic Opportunities for Consumers: Curtailment presents opportunities for consumers to save on energy costs by adjusting their usage. Flexible consumption models could support grid stability and maximise economic benefits. 6. Market Reform for Renewable Growth: Australia’s energy market needs to adapt to the variability of renewables. Strategic market reforms could stabilise pricing, support renewable integration, incentivise the adoption of storage technologies and flexible loads. 7. System Design Challenges in Decarbonisation: Curtailment reveals the need for smarter grid management as Australia moves towards decarbonisation. Addressing these system design challenges could accelerate the country’s transition to a low-carbon future. 8. Aligning Climate Goals with Energy Efficiency: Reducing renewable energy waste through curtailment aligns directly with Australia’s long-term climate goals. Prioritising storage and grid improvements will strengthen the country’s sustainability efforts.    Curtailment poses challenges but also opportunities for Australia’s renewable sector. With investment in infrastructure, storage, market reforms, and flexible loads, the nation can better harness its renewable potential and meet its climate goals. References: 1. Australia 'wasting' record amounts of renewable energy as share of wind and solar soars by Daniel Mercer (Sat 06 Sep 2024) .. https://lnkd.in/g8-DmV-X

India’s clean energy transition is entering a more mature phase with the approval of a 500 MW pilot under the Contracts for Difference (CfD) framework by the Ministry of New and Renewable Energy. By introducing revenue certainty while maintaining participation in market-based price discovery, this mechanism addresses one of the sector’s most persistent challenges, price volatility, thereby materially lowering financing risk for developers. While projects remain operationally linked to the market, revenues are stabilised through financial settlement, strengthening project viability and investment confidence. This reflects a fundamental shift toward a more market-oriented renewable ecosystem. By strengthening investor confidence and enabling scalable deployment, the initiative is expected to support faster expansion of clean energy capacity, while benefiting the government through improved cost control, greater price predictability, reduced risk and accelerated clean energy adoption. #IndiaEnergy #MNRE #PowerSectorReform #RenewableEnergyIndia #FutureOfEnergy

In an incisive new research note, Morgan Stanley states that the US power sector faces a crossroads between "old-fashioned utility recipes" versus "faster, cheaper, and cleaner ways to increase power supply," including Grid-Enhancing Technologies (GETs), Surplus Interconnection (SI), Advanced Reconductoring (AR), and Flexible Loads (FL). "Institutionalism and inertia" have limited uptake of these solutions, the authors note, but "corporate and government interests can 'nudge' slow-to-innovate companies and regulators to pursue new solutions." We appreciate them highlighting our study, "Rethinking Load Growth," as a resource to inform these efforts.

Major local content reform in the Indonesian electricity sector - In a significant regulatory shift, the Indonesian Government has just issued 4 new regulations that overhaul the domestic content requirements for the development of electricity infrastructure for public interest. For the last decade, the development of electricity infrastructure (including by IPPs) was required to use certain minimum levels of domestic goods and services pursuant to a regulation from the Ministry of Industry (MOI 54/2012). Although the intent of these requirements was laudable (to incentivize the development of local supply chains of critical goods and services), the restrictive and inflexible local content requirements combined with the relatively slow growth of competitive domestic supply of certain key components, posed significant challenges to IPPs and private developers. This has in turn led to prolonged uncertainties and bankability challenges for the structuring and financing of projects which have constrained the level and pace of investments into the Indonesian power sector, including the development of renewable energy projects. The new regulations now bring much-needed relaxation (especially in terms of the applicable local content thresholds), flexibility and clarity to the requirements and also possible exemptions. This important and long-awaited reform should lead to a more conducive environment for investments into this critical sector, and allow to unlock the large potential of untapped resources which the archipelago holds and support its path towards energy transition. #Indonesia #Electricity #Renewables #EnergyTransition

Technology readiness for renewable integration: is it about capability or is it about utilisation? Our analysis across 50 power systems reveals an important paradox: modern technologies can provide new grid services and evolve orders of magnitude faster than our regulatory frameworks can adapt to enable their participation: https://lnkd.in/dMK7H_Zk The most important technological solutions for stability and flexibility are already at high technology readiness levels, with some at demonstration level, and many others commercially mature and operating at scale. They can provide multiple grid services: - Batteries can provide voltage waveform stiffness, voltage control and inertia, as well as support energy shifting from sub-seconds to hours. - Smart charging and V2G can provide fast frequency response <2s while supporting daily energy management and peak shaving. - STATCOMs can provide voltage waveform stiffness, voltage control and damping of oscillations - Synchronous condensers are inherently grid forming and can provide fault current and inertia Unfortunately, we do not always take advantage of all these capabilities due to our slow-moving regulatory frameworks: - Grid codes often take years to update for new technology capabilities - Market participation rules structured around conventional generation - Procurement frameworks for system services slow to recognize new providers - Market design does not always align system needs with remuneration to participants - Verification and testing procedures are still often designed for traditional technologies - Complex stakeholder processes delay recognition of new technical solutions This isn't about downplaying the role of R&D - we absolutely need continued innovation. Instead, it is about highlighting an immediate opportunity: significant integration capacity exists in technologies that are already here, waiting to be unlocked through modernised frameworks. What regulatory reforms should be prioritised to better extract value from these technical capabilities? One approach gaining traction is the use of regulatory sandboxes to test new participation models, though broader reforms in how we develop and adapt regulations may be needed. And of course, power markets will need to continue evolving... Good work by Javier Jorquera Copier Rena Kuwahata Jacques Warichet and many other IEA colleagues!

Listening to the debate on locational pricing in the UK, you’d think it was a radical experiment: untested, risky, potentially destabilising. In reality, it’s a standard feature of well-functioning power markets around the world — already in use in Italy, the Nordics, Australia, and most of the US. And the direction of travel is clear: OECD countries are moving toward greater locational granularity, not away from it. Independent studies in the UK, Germany, and the Netherlands all point to the same conclusion: ✅ Massive consumer savings ✅ Better grid utilisation ✅ More efficient investment signals So why the big debate? Perhaps because these gains come from reducing implicit rents embedded in uniform national pricing — rents that currently accrue to a small number of well-organised producer interests. To be clear, some of these concerns are entirely legitimate: ✔ Investors need regulatory stability ✔ Assets were built in good faith ✔ Sudden changes can erode trust in the UK energy sector So it's important that reform is handled sensitively - whether that means phase-ins, grandfathering, or transitional compensation. But these concerns can’t justify freezing an inefficient system. Because the cost of inaction is enormous. Independent analysis for Ofgem suggests £31 billion in benefits from zonal reform in GB. A similar study for Germany suggested €7.3 billion/year in avoided congestion and grid costs. Both are independent reports commissioned by government/regulators. Locational pricing isn’t radical. It's essential for economic competitiveness. And I doubt many officials need convincing. But the risk for the government is that the constituencies that stand to gain — consumers, flexible resources, demand-side innovators — are either too dispersed or not yet large enough to be heard properly. #LocationalPricing #ElectricityMarkets #EnergyReform #RegulatoryPolicy #ZonalPricing #EnergyTransition #ConsumerBenefit #ElectricityMarketReform #LocationalSignals #GridEfficiency #EnergyPolicy #RegulatoryStability #PowerMarkets #ZonalPricing #ConsumerBenefit

25th May 2025 – A Historic Day in India’s Power Sector On 25th May 2025, Real-Time Market (RTM) electricity prices hit ₹0/unit — an unprecedented moment for the Indian power sector. This was driven by: • Unseasonal rains & lower demand (Sunday) • High renewable energy generation • Excess supply with fewer buyers Implications: • Generators incurred losses despite selling (due to exchange fees, transmission charges) • Grid frequency reached 50.3 Hz, indicating system stress • Transmission cost exceeded the value of power — making long-distance wheeling uneconomical Opportunity Ahead: This scenario signals a massive opportunity for decentralized, plug-and-play power systems — enabling industries, warehouses, commercial buildings, and households to go partially or fully off-grid. Who Can Drive This Transition? Beyond RE and battery players, a wider ecosystem is now critical: • Stabilizer & inverter OEMs – for power quality • DC-AC converter makers – to link RE + load • BMS providers – for safe & efficient battery use • NBFIs – to enable financing for mass adoption Together, they can offer modular, plug-and-play systems tailored for: • MSMEs & industrial units – peak shaving, uninterrupted ops • Warehouses – stable power for lighting, security, IT systems • Commercial spaces – cost optimization and reliability • Homes & residential societies – backup + arbitrage • Farms & rural setups – standalone or microgrid use What’s Needed: • Fee structure reform in power exchanges • Policy push for localized energy storage & microgrids • Flexible financing, leasing, and “energy-as-a-service” models • Integration standards for RE + Storage + Control Systems Conclusion: Free power is not just a pricing event — it’s a signal. With rising RE penetration, this may become common. Instead of seeing this as a grid risk, let’s build an ecosystem that turns this into business opportunity and energy independence. Is your organization ready to enable the off-grid revolution? #PowerMarket #EnergyTransition #Renewables #RTM #DecentralizedEnergy #OffGrid #Warehousing #REStorage #SmartEnergy #BMS #NBFI #CleanEnergy #EnergyInnovation

🚀 Reforming Australia’s energy markets: A $19 billion DER opportunity 💰 My submission to the National Electricity Market (#NEM) Wholesale Market Review, prepared for Solar Citizens, outlines how outdated rules and market design are stifling $19 billion in net benefits from distributed energy resources (#DER) by 2040. As pv magazine Australia highlights, this isn’t just about rooftop solar—it’s about redesigning markets to prioritise DER as critical infrastructure for affordability, reliability, and decarbonisation. DER—including solar, batteries, EVs, and flexible demand—could deliver: $11 billion in avoided network costs (poles, wires, substations), and $8 billion in reduced large-scale generation/storage needs. 20% of contingency FCAS raise is already provided by aggregated DER today. Yet current market rules and network revenue regulation: * Impose 1MW bid minimums, reducing competition * Lock households and SMEs out of the wholesale demand response mechanism * Let networks prioritise costly infrastructure over DER solutions * Include no minimum demand equivalent of the RERT (emergency peak supply), and * Are not designed for a majority renewable electricity system. See my submission for the details of this series of principles to support the participation of aggregated DER in markets: * Market design should be prepared from first principles * Value resilience to extreme weather events in reliability * Consider how greater deployment of SAPS and microgrids could be facilitated * Ensure fair and non-discriminatory access for all forms of aggregation to all markets and regulatory procurement * Ensure equitable, fair compensation * Facilitate robust competition, especially through the lowest reasonable minimum bid sizes *Establish the best way to manage minimum demand * Enable value stacking to maximise benefits Ensuring fair and inclusive consumer participation: * Voluntary consumer participation * Tiered participation options * Ensure appropriate consumer protections, including transparency about benefit splits Technical and regulatory enablers of #ADER: * Create open data and open communication protocols, use open-source software, make detailed network data available and allow third party access to real-time smart meter data with consumers’ permission * Implement Dynamic Operating Envelopes * Upgrade Market Systems #EnergyPolicy #RooftopSolar #NEMReform #aggregatedDER Integrate To Zero, IEEFA Australia, The Superpower Institute, UTS Institute for Sustainable Futures, NSW Decarbonisation Innovation Hub, Blunomy, Tim Nelson, Paula Conboy, NACD.DC GAICD

⚡ The Future of Electricity Market Design: Building on Strengths, Addressing Gaps   🌍 As the global energy system transitions toward higher shares of variable renewables and greater decentralization, the architecture of our electricity markets must evolve to remain fit for purpose. Pleased to share the report from the International Energy Agency (IEA), which provides a comprehensive assessment of how wholesale electricity markets are performing in this changing landscape. The report highlights that while our current market foundations are strong, significant gaps remain, particularly in long-term investment signals.   Key Takeaways:   1️⃣ Short-term markets (day-ahead, intraday, and real-time) continue to operate with remarkable reliability, maintaining secure supply more than 99.9% of the time across major regions. 2️⃣ Medium- and long-term markets have not kept pace. They suffer from low liquidity, with trading often concentrated only in the first two years of delivery, leaving participants with limited tools to manage long-term risk. 3️⃣ Tools such as capacity remuneration and decarbonization supports (e.g., CfDs) have become structural features of modern systems, essential for mobilizing investment in capital-intensive technologies such as nuclear and large-scale storage.   ⚠️ The Challenges:   ✴️ A critical mismatch exists between developers’ needs for long-duration contracts and buyers' preferences for short-term commitments. ✴️ Unintended Distortions, such as support schemes that pay a fixed price regardless of market conditions, can weaken price signals and lead to overproduction during surplus periods. ✴️ Smaller players often face prohibitive collateral requirements and creditworthiness thresholds, limiting their ability to participate in hedging.   💡 The Opportunities: ✳️ Enhancing temporal resolution (moving to 15-minute or shorter intervals) and locational granularity (nodal pricing) can better reflect real-time network conditions. ✳️ Unlocking the potential of Distributed Energy Resources (DERs) through aggregation and lower participation thresholds could provide immense flexibility and peak-shaving benefits. ✳️ Implementing schemes to drive liquidity in long-term markets can make trading cheaper and more accessible for all participants. ✳️ Market reform should not be a one-off exercise but a regular, iterative process. The report emphasizes that for reforms to be successful, they must be: ✅ Tailored and context-specific. ✅ Transparent and predictable in implementation. ✅ Pragmatic and deliverable without unnecessary complexity. ✅ Holistic and adaptable to the entire market framework. ✅ Secure, affordable, and sustainable electricity in the "Age of Electricity" depends on markets that work in concert across all time horizons.   #EnergyTransition #ElectricityMarkets #Renewables #GridResilience #EnergyPolicy #Decarbonization

Bangladesh’s energy security may depend on a narrow waterway thousands of kilometers away: the Strait of Hormuz. Nearly 20% of the world’s petroleum and a major share of LNG pass through this strategic chokepoint connecting the Persian Gulf to global markets. For Bangladesh, which increasingly relies on imported LNG to power its electricity sector, any disruption there could quickly ripple through the economy. Over the past decade, LNG imports helped Bangladesh manage declining domestic gas reserves and rapidly rising electricity demand. Floating terminals were built, power plants adapted, and long-term supply contracts signed; primarily with Gulf producers like Qatar. But what looked like diversification has created a new form of dependency. Most LNG shipments bound for Bangladesh must pass through the Strait of Hormuz. Even the perception of instability in the Gulf can trigger price spikes. For an import-dependent country with limited foreign exchange reserves, this means mounting fiscal pressure, costly subsidies, and difficult choices over electricity tariffs. The deeper issue is structural. Bangladesh’s power mix still relies heavily on fossil fuels, while renewable energy remains marginal. First, renewable energy must move from policy talk to large-scale action. Bangladesh has considerable solar potential, especially for rooftop installations and utility-scale solar parks. The rapid decline in global solar costs means that solar power is now one of the cheapest sources of electricity in many parts of the world. Development institutions like the The World Bank, Asian Development Bank (ADB), and IFC - International Finance Corporation have often highlighted Bangladesh’s untapped renewable potential and the role of private investment in scaling it up. Second, domestic gas exploration deserves renewed focus. Large areas of Bangladesh’s onshore and offshore basins remain underexplored. While new discoveries are not guaranteed, investing in exploration is often cheaper in the long run than committing to decades of expensive LNG imports. Third, regional electricity trade offers a promising opportunity. South Asia has abundant hydropower resources, particularly in Nepal and Bhutan. Expanding cross-border electricity imports from these countries, could give Bangladesh stable and relatively low-cost power while strengthening regional energy cooperation. Fourth, nuclear power is set to play a larger role in the national grid. The Rooppur Nuclear Power Plant, Bangladesh’s first nuclear facility, has the potential to provide reliable baseload electricity for decades once fully operational. Although nuclear projects involve high initial costs, their long-term operating expenses are relatively low and less affected by global fuel price swings. The path forward is diversification. Energy security isn’t just about supply it’s about resilience. And resilience begins with reducing dependence on a single route, fuel, or region.