DNSP, respectively) in each State act as natural monopoly business and sole providers in their respective supply areas. The TNSP and DNSP are either State-owned
or operated by private network providers and are independently regulated by
Australia’s national energy regulator, the Australian Energy Regulator (AER), to
mitigate potential monopolistic competition behaviour (COAG Energy Council
2018a).
The regulatory framework of the NEM is set out in the National Electricity Law
(NEL) and associated the National Electricity Rules (NER) as well as the National
Energy Retail Law (NERL). These are administered by participatory States and
territories via application acts which have been passed by the respective State and
Territory Parliaments to give effect to the extent to which the NEL and NERL apply
in the respective jurisdiction (AEMC 2018a). The resulting framework established
‘shared ministerial oversight of national energy policy and law through a ministerial
Council [currently known as ‘Council of Australian Government (COAG) Energy
Council’], chaired by the Australian Government’s Energy Minister’ (COAG
Energy Council 2018b), and the three key bodies responsible for the governance
of the NEM. The Australian Energy Market Operator (AEMO) supervises wholesale
generation within the NEM, whilst the Australian Energy Regulator (AER) regulates
the TNSP and DNSP. The Australian Energy Market Commission (AEMC) reviews
and amends the NER in response to rule change proposals. Outside this core
regulatory framework is the COAG Energy Council which is made up of State and
Federal energy ministers who pursue national energy policy reforms (AEMC
2018b). Despite the previous unbundling of the Australian electricity market, the
structure and regulatory framework governing Australia’s electricity market still
resembles the requirements of previously large-scale centralised generation, transmission and distribution of fossil fuel energy sources (Crossley 2014). This feature
of the NEM poses challenges for the economic regulation of the prevalent monopoly
businesses (ACCC 2018) but also barriers for the integration of new technologies
which are able to operate across the traditionally defined boundaries of the
unbundled Australian electricity market (e.g. energy storage system) and renewable
energy generation assets. For example, solar, wind and biomass assets are able to be
owned and operated by private landholders who may have the capabilities not only
to fulfil their own energy needs but indeed act as an energy provider to the national
electricity grid. To date, around 80% of Australia’s electricity supply (equating to
approximately 200 TWh annually) is provided through the NEM, thereby making it
one of the world’s largest interconnected electricity power systems with 40,000 km
of transmission lines and nine million customers (AEMO 2018a).
The NEM’s framework is built on a model of large-scale synchronous energy
generation, a vertically integrated transmission and distribution network and competing retailers, where electricity prices are settled via spot prices and risks are
hedged via complex financial contracts (Australian Government Department of the
Environment and Energy 2018c). Yet, recent technological advances in renewable
energy generation and energy storage assets, in addition to energy market reforms
spurred by the 2012 Power of Choice review, have created additional challenges and
complexities to the existing structure of the NEM (AEMC 2018c). For example, a
7 Water Security: Challenges to the Irrigation Water-Energy Nexus in Australia
95
or operated by private network providers and are independently regulated by
Australia’s national energy regulator, the Australian Energy Regulator (AER), to
mitigate potential monopolistic competition behaviour (COAG Energy Council
2018a).
The regulatory framework of the NEM is set out in the National Electricity Law
(NEL) and associated the National Electricity Rules (NER) as well as the National
Energy Retail Law (NERL). These are administered by participatory States and
territories via application acts which have been passed by the respective State and
Territory Parliaments to give effect to the extent to which the NEL and NERL apply
in the respective jurisdiction (AEMC 2018a). The resulting framework established
‘shared ministerial oversight of national energy policy and law through a ministerial
Council [currently known as ‘Council of Australian Government (COAG) Energy
Council’], chaired by the Australian Government’s Energy Minister’ (COAG
Energy Council 2018b), and the three key bodies responsible for the governance
of the NEM. The Australian Energy Market Operator (AEMO) supervises wholesale
generation within the NEM, whilst the Australian Energy Regulator (AER) regulates
the TNSP and DNSP. The Australian Energy Market Commission (AEMC) reviews
and amends the NER in response to rule change proposals. Outside this core
regulatory framework is the COAG Energy Council which is made up of State and
Federal energy ministers who pursue national energy policy reforms (AEMC
2018b). Despite the previous unbundling of the Australian electricity market, the
structure and regulatory framework governing Australia’s electricity market still
resembles the requirements of previously large-scale centralised generation, transmission and distribution of fossil fuel energy sources (Crossley 2014). This feature
of the NEM poses challenges for the economic regulation of the prevalent monopoly
businesses (ACCC 2018) but also barriers for the integration of new technologies
which are able to operate across the traditionally defined boundaries of the
unbundled Australian electricity market (e.g. energy storage system) and renewable
energy generation assets. For example, solar, wind and biomass assets are able to be
owned and operated by private landholders who may have the capabilities not only
to fulfil their own energy needs but indeed act as an energy provider to the national
electricity grid. To date, around 80% of Australia’s electricity supply (equating to
approximately 200 TWh annually) is provided through the NEM, thereby making it
one of the world’s largest interconnected electricity power systems with 40,000 km
of transmission lines and nine million customers (AEMO 2018a).
The NEM’s framework is built on a model of large-scale synchronous energy
generation, a vertically integrated transmission and distribution network and competing retailers, where electricity prices are settled via spot prices and risks are
hedged via complex financial contracts (Australian Government Department of the
Environment and Energy 2018c). Yet, recent technological advances in renewable
energy generation and energy storage assets, in addition to energy market reforms
spurred by the 2012 Power of Choice review, have created additional challenges and
complexities to the existing structure of the NEM (AEMC 2018c). For example, a
7 Water Security: Challenges to the Irrigation Water-Energy Nexus in Australia
95