Energy Supply and Value Chain

This essay discusses the future challenges and opportunities in the Australian National Electricity market (NEM) and its impact on the energy supply and value chain. It explores the major stakeholders, current model, and the role of government policies in addressing the issues. The essay also highlights the changing market dynamics and the increasing penetration of alternative energy sources in Australia.

Running head: ENERGY SUPPLY AND VALUE CHAIN
Energy Supply and Value Chain
Name of the Student
Name of the University
Author Note

1ENERGY SUPPLY AND VALUE CHAIN
Australian National Electricity market (NEM) is on of t the national important market
in world and it is reported that it is in the transition phase as in recent time with the increased
transmission of carbon in the environment the concept of energy supply is highly changing.
It is reported that the energy market of Australia is changing in a great manner in recent
years. It is expected that in upcoming year the market of Australian Electricity Market will be
changed a lot due to the entrance of alternative energy sources in the world. In Australia,
due to the presence of new opportunity and low cost energy sources the market is changing
greatly. Hence, it is reported that , in near future the electricity market in Australia, may be
occupied by this alternative electrical resources which are low in costs and along with this the
amount of carbon emission is also very low during the production of this energy resources in
the country. In order to make a road map for the Australian National Electricity market
(NEM), government has made a flagship project named National Energy Guarantee so that
the Australian National Electricity market (NEM) can address the missing market of the
country. Australian National Electricity market (NEM) is mainly operated by the Australian
National Electricity market (NEM) storage and they are responsible for operating the current
market of electricity in Australia. The existing regulatory framework mainly provides
support to the current electricity market and it is reported that, the electricity is largely
produced by the large suppliers in the country. This produced electricity is supplied by the
national distribution system of the country to the industries and the residential customers of
the country. THE Australian Energy market operator in the country generally identifies the
key stakeholders for the Australian National Electricity market (NEM) and after identifying
the challenges they are associated with the alternatives that can be made available for the key
stake holders of the country (ATSE 2017, p- 5). In this essay, the mainly the future of
Australian National Electricity market (NEM) is discussed. In addition to this, the major
challenges faced by the Australian National Electricity market (NEM) and Australian

2ENERGY SUPPLY AND VALUE CHAIN
National Electricity market storage, the major stakeholders of Australian National Electricity
market (NEM) storage, current model of this industry, the key player of the industry, effect
of technology on the Australian National Electricity market (NEM) , role of government
policy in addressing the issues of Australian National Electricity market (NEM) are discussed
in a brief manner.
In recent time it is reported the Australian National Electricity market (NEM) is
facing various disruptions, pressures from other industries, tests, technical challenges and
socio economic challenges as well. In near future, it is reported that, the Australian National
Electricity market (NEM) will face various challenges due to this key issues. On the technical
ground, it can be reported that there is a requirement of rethinking for the power grid
management in the South Australia. Moreover, it can be said that, the changing market of the
Australian National Electricity market (NEM) is the main issue that is confronting the
market of Australian National Electricity market (NEM) and it is expected that in near future
this issue will also be faced by the Australian National Electricity market (NEM). In most of
the areas of Australia, the Australian National Electricity market (NEM) is the only
connecting grid for electricity and it is reported that the only in a few areas of western
Australia, three are a small interconnected grids. From the various report, it is reported that,
the price of the energy is set in a five minute basis and on the other hand the market is settled
in an every 30 minute basis. It is quite evident that at that very moment there is no such
forward despatch market and the participants can contact the market players externally
(Billimoria and Poudineh 2018, p-7). Since the 2010, the needs of the energy requirement of
the Australian population has change greatly due to the availability of different energy
sources in the market of electricity. As a result the Australian National Electricity market
(NEM) storage should also adapt as per the market requirement. It is reported that, the from
a last few years the installation rate of roof top solar system among the house hold customers

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are greatly enhanced and government is also supporting this behaviour by providing various
schemes and incentives so that peole can have that solar system on their roof. Moreover, the
prices of this electricity is also very low in comparing with the conventional electricity
available in the market of Australia. In 2017, it is reported that, almost over 7 GW roof top
solar panel is distributed in Australia and in Queensland the penetration rate of solar
photovoltaic system is more than 50 per cent (Billimoria and Poudineh 2018, p-8-9). This
changing nature of the Australian National Electricity market (NEM) has greatly influenced
the Australian National Electricity market (NEM) storages of the country the diurnal pattern
of demand is changed greatly due to this changing market of the country. In various states of
Australia like South Australia, there is clear duck curve of demand that is showing that the
alternative source of energy with a low cost availability has become one of the most
confronting issues in front of the National Electricity market (NEM) storages in Australia. It
is reported that , the pattern will affect the market of the country more in upcoming years and
based on the statistics available in the market regarding the installation rate of solar PV cells
in place of traditional electricity in the market, it is expected that, the capacity of roof top
solar PV will enhanced to 20 GW by the end of 2020 and as part of the long term
expectations it is assu4emed that the amount of energy will be 37 GW in next 10-20 years
(Billimoria and Poudineh 2018, p-9-10). Australia is planning to be the world’s most
decentralized systems with almost 43 per cent of generation capacity from the solar PV
sources by the end of 2040. The regions of South Australia have the lowest energy demand
from the traditional National Electricity market (NEM) and they has become the net exporters
of energy to the other regions of the country. It is expected that by the end of 2024-25, the
region of the South Australia will have the lowest requirement of electricity in the time of
summer due to the high usage of solar PV system in their region (Billimoria and Poudineh
2018, p-12-14).

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While, analysing the strengths of this condition it is reported that, with the lower
demands of the traditional electricity in the market of Australia, it is reported that, the growth
of the new energy resources in the market, the demand of coal from the market has decreased
and it will help to reduce the burden of coal generation fleet in the country and it is highly
required as the coal generation fleet of the country is aging and by the end of 2040 , 70 per
cent of the coal fleet will arrive almost at the end of their functioning (Rutovitz et al. 2017,
p-19). So, this can be countered as a strengthens of this NEM that they can use the resources
in a sustain manner. On the other hand, in last ten years, it is reported that, the price of the
electricity is rising in a great manner and on the other hand government is supporting the use
of renewable energy by providing incentives to their users. Hence, this price difference is one
of the major weakness for the National Electricity market (NEM) storage in Australia. On
the other hand, the availability of the alternative energy resources in the market also help the
current National Electricity market (NEM) in terms of reduced burden and enhanced
sustainability of the market place of the country. Moreover, the use of renewable energy also
has created opportunities to the traditional electricity market of the country as it is quite
uncertain in nature. For example it can be said that the availability of the wind and solar is
dependent on the seasons and so it cane be said that, it is one of the opportunities for the
National Electricity market. On the other hand, while discussing the threats of the National
Electricity market (NEM) storage, it can be said that, there are a few threats in the market
that can threaten the current market of National Electricity market (NEM) in Australia
(Rutovitz et al. 2017, p-17). The introduction of the VRE and DER creates more challenges
to maintain the reliability of National Electricity market in Australia in terms of the
traditional energy of the country. In addition to the solar PV cells availability in the country,
the introduction of wind energy in the market is creating more threat to the traditional energy
market of the country. It is reported that, the adequacy of the of those type of energy in the

5ENERGY SUPPLY AND VALUE CHAIN
National Electricity market has also make the condition difficult for the traditional electricity
resources of the country as well (Macgill 2018). The sufficient availability of the renewable
energy in the market is also affecting the prices of the electricity in the Australian market and
it can be another threat for the National Electricity market in near future as well.
According to the report of the Australian Energy Market Operator (AEMO), it is
observed that in National Electricity Market (NEM) storage of the country the two major
stake holders are AEMO and CEFC. AEMO is the body responsible for the planning and
operation in the National electricity Market (NEM) and being an independent agency it is
associated with the long term security of the market as they are also associated with the
consumers of the country (ATSE 2017, p- 5). On the other hand, the CEFC is commercial
independent organization initiated by the government of the country. The main stakeholders
of this CEFC are the investors, businesses and scientists in the field of Research and
Development (R&D) of clean technology. As one of the primary stakeholders of the
National Electricity Market (NEM) of Australia CEFC mainly focuses on the investments
that can create the environmental, social, and economic benefits and thereby accelerating
the changes in the energy sector of the country. In recent time, with the advancements of the
renewable energy in the market, along with the support of the government (Macgill 2018). .
It is reported that the major stakeholder of the electricity market of the country is also
focusing towards the renewable energy sectors of the country as a part of 2011 Clean Energy
Future Plan. In recent time they are focussing on raising awareness about the renewable
energy of the market and they are also involved in the process of the renewable energy
source usage in near future (Masmas 2017, p-96). From the market information of the country
it can be easily marked that the key players of the National Electricity Market (NEM) of the
country follows a simple business for operating in the market of the country. In the current
business model of the country, it can be said that National Electricity Market (NEM) is a

6ENERGY SUPPLY AND VALUE CHAIN
wholesale market in which generators sell electricity to the retailers. The AEMO uses the
spot prices of the electricity while selling electricity to the buyers. From NEM , AEMO
buying electricity to sell to their customers and it is reported that there are almost 100
generators and retailers in the market for performing this function in the National Electricity
Market (NEM) of Australia. The National Electricity Market (NEM) storage of Australia the
AEMO must recover the costs of the electricity from the consumers and most of the
consumers do not participate in the process directly with the NEM in this process. The
customer of the electricity pay the charges and tariffs to the AEMO and this price includes
the spot prices set by the AEMO. The participants of AEMO, have to manage the financial
risks associated with this process and this includes the volatile nature of the electric market in
Australia. In current market scenario, more number of commercial sectors and household
sectors are switching towards the installation of the batteries for the energy supplies and it is
reported that the consumers that is commercial or household are focussing on positive return
investment by reducing the burden of the electricity bills which are enhancing since last few
years in an exponential rates (Australian National Energy Market Operator 2019, p-2).
Moreover, it is also reported that with the advancement of the time the costs of the batteries
will also reduce a lot and this will again promote the profit of the stakeholders. The recent
scenario the stake holders initially faces challenge in the new technology and it is observed
that the standard S‐curve trajectory of the growth is very slow in nature. This can be said the
entrance of new technology in the market is not so easy to understand during the initial
period of time as it was new to the market and the stakeholders are facing problem in
understanding the new technology (Boyle, Bruce, and Macgill 2018). The rate of
involvement in the new process of energy supply is enhancing in a gradual manner and it is
expected that, in upcoming years most of the consumers of the traditional energy, will be
familiar to the new sources of the energy market. In recent time, it is reported that, the

7ENERGY SUPPLY AND VALUE CHAIN
alternative sources of the electricity in the National Electricity Market (NEM) has not face
adequate penetration. However, it is predicted that the residential consumers of the country
are going for the alternative source of electric in order to reduce the electricity tariffs as well
(Brinsmead et al. 2015, p- 24).
As a primary stakeholders of the National Electricity Market (NEM), it will be very
helpful for the consumers of the National Electricity Market (NEM) as they are benefitted
economically as they have to pay lower tariff rates for the use of alternative energies and
this condition is benefitting the consumers by all the ways. On the other hand, in this current
equation, the retailer and generator can have benefit if they adapt themselves as per the
requirement of the market. For example it can be said that the retailer and the generator of
electricity in the National Electricity Market (NEM) should focus more on the renewable
energy resources as with time most of the consumers may shift from the traditional energy
resources to the alternative electricity resources of the country. This transition to the
renewable electric sources storage will also help the retailers and stake holders in terms of
generating business in the National Electricity Market (NEM) of Australia ( AEMC 2018, p-
84-86)
From various resources, it is reported that the National Electricity Market (NEM)
storage is advance day by day and simultaneously the costs of the National Electricity Market
(NEM) storage is reducing as well. It is reported that, in the field of renewable energy use of
battery is one of the primary alternative and it is observed that with time, the price of this
batteries are decreasing . Moreover the cost of the solar PV is also reducing due to the
advancement of the technology as well. From the data of the existing report, is treported that
the with the advancement of technology in the National Electricity Market (NEM) storage
will gradually benefit the consumers of the electricity in the country in terms of low cost
electricity. In the market of Australia, the traditional electricity retailers will face severe

8ENERGY SUPPLY AND VALUE CHAIN
challenges as they have to compete with the resources of alternative energy resources in
terms of sustainability and production cost. However, it is recommended that, if the
stakeholders of the current market, wi8ll not adapt to the modern market requirement, then
they will have to face immense challenges from the other ESVC such as solar PV suppliers,
electricity generated by the batteries, NEM wind (Macgill 2018).
Moreover several government policies and measures can promote the advancement of
alternative energy resources in the country. It is reported that, for using the solar PV cells,
government is providing incentives and this will promote the use of alternative energy in the
country in place of traditional energy. Moreover, various government polices are also
promoting the use of renewable energy for reducing the carbon emission in the air. In
addition to this, the government is investing more in the research process and technological
development process. It can be said that, this type of support is very crucial for the emerging
technology and emerging industries as they are in the early stage of development (Boyle,
Bruce, and Macgill 2018). In order to fix the trilemma of energy the government will
promote the use of technology so that advancement of the technology will make the new
energy resources more secure, sustain and affordable. Moreover the policy makers should
consider the position of the major stakeholders so that they can have the major benefits from
the system. For providing sustainability to the new system the primary investments will
come from the end of the government (Brinsmead et al. 2015, p-21). It is reported that the
government will pay AUD$ 50 million for in next ten years for the advancements of the
battery technology use in the country. Another Government agency The Australian
Renewable Energy Agency (ARENA) will provide almost 20.9 million to the solar project
and this organization is planning to provide $12 million to the battery storage at the
Dalrymple station (Cunsolo 2018,p-21-24).

9ENERGY SUPPLY AND VALUE CHAIN
Hence, it can be concluded that the, the future of the Natioanl Electricity Market
(NEM) storage is not safe at all with the advancement of the technology. Moreover, with the
help from the end of the government, most of the consumers are now shifting bto the
renewable energy resources from the traditional electricity. The major stake holders of the
National Electricity Market ( NEM) storage will face difficulties in sustaining in the market if
they will not adapt themselves as per the requirement of the market. Moreover, government
is also promoting the use of alternative electricity resources in order to reduce the carbon
emission into the environment.

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References
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