{"title":"Be Wary of Paying Wounded Bulls – Capacity Markets in Australia's National Electricity Market*","authors":"Tim Nelson, Joel Gilmore, Tahlia Nolan","doi":"10.1111/1759-3441.12374","DOIUrl":null,"url":null,"abstract":"<p>Australia's Energy Security Board is currently considering whether to pivot the east-coast Australian National Electricity Market from an energy-only market to include some form of capacity remuneration. This discussion is occurring during an unprecedented energy crisis where the wholesale market was suspended following a 275% increase in underlying wholesale energy prices. This article unpacks the root causes of the current energy crisis and how a traditional capacity market would have been ineffective in addressing it. We find that a traditional capacity market may provide windfall gains to wounded bull coal generators and be counterproductive in driving new investment in dispatchable technologies. Our recommendation is that policy-makers should focus on utilising existing regulatory tools and a capacity reserve to insure against the unanticipated failures of ageing coal plants.</p>","PeriodicalId":45208,"journal":{"name":"Economic Papers","volume":null,"pages":null},"PeriodicalIF":0.9000,"publicationDate":"2022-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economic Papers","FirstCategoryId":"1085","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/1759-3441.12374","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 1
Abstract
Australia's Energy Security Board is currently considering whether to pivot the east-coast Australian National Electricity Market from an energy-only market to include some form of capacity remuneration. This discussion is occurring during an unprecedented energy crisis where the wholesale market was suspended following a 275% increase in underlying wholesale energy prices. This article unpacks the root causes of the current energy crisis and how a traditional capacity market would have been ineffective in addressing it. We find that a traditional capacity market may provide windfall gains to wounded bull coal generators and be counterproductive in driving new investment in dispatchable technologies. Our recommendation is that policy-makers should focus on utilising existing regulatory tools and a capacity reserve to insure against the unanticipated failures of ageing coal plants.
期刊介绍：
Economic Papers is one of two journals published by the Economics Society of Australia. The journal features a balance of high quality research in applied economics and economic policy analysis which distinguishes it from other Australian journals. The intended audience is the broad range of economists working in business, government and academic communities within Australia and internationally who are interested in economic issues related to Australia and the Asia-Pacific region. Contributions are sought from economists working in these areas and should be written to be accessible to a wide section of our readership. All contributions are refereed.
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