How energy is bought and sold

Who are the participants in the National Electricity Market (NEM)?

By September 4, 2020September 24th, 2020No Comments
Brisbane city from Kangaroo Point

You probably haven’t given them much thought, but there are a wide variety of people, businesses and organisations that make it possible for you to turn on your light switch.

The National Electricity Market (NEM) operates on one of the world’s longest interconnected power systems, spanning approximately 5,000 kilometres across Australia’s eastern and south-eastern coasts – from Port Douglas in Queensland to Port Lincoln in South Australia and across Bass Strait to Tasmania.

The NEM supplies about 200 terawatt hours (TWh) of electricity to 10 million customers every year. That’s a lot of power, and it takes a lot of people to make it happen.

How electricity is measured

Electricity is generated by wholesalers, and transported via high voltage transmission lines to large industrial energy users and local electricity distributors in each of the five regions that make up the NEM – Queensland, New South Wales (including the Australian Capital Territory), Victoria, South Australia and Tasmania.

Electricity Supply Chain

The sale of electricity from generators to consumers is facilitated through what’s called a ‘pool’, or ‘spot market’, in which electricity supply and demand is matched in real-time through a centrally coordinated dispatch process. This process is managed by the Australian Energy Market Operator (AEMO), in line with the National Electricity Law and National Electricity Rules.

Of course, not just anyone can set up shop on the NEM. To take part, you have to register in one (or more) participant categories. At the moment, there are more than 400 registered participants in the NEM, including generators, transmission network service providers, distribution network service providers and more.

Participant categories in the NEM include:

  • Generator – Any person or organisation who owns, controls or operates a generating system connected to a transmission or distribution network has to register as a generator, unless they meet the exemption criteria. An exemption can be granted based on the nature, size, type and operation of the generating system; the registration of an intermediary in place of the generator; or on a temporary basis.
  • Small generation aggregator (SGA) – An SGA can supply electricity aggregated from small generating units that are connected to a distribution or transmission network. A ‘small generating unit’ is one owned by someone who has been exempted from registering as a generator based on the size of their equipment.
  • Customer – A registered participant that purchases electricity supplied through a transmission or distribution system to a connection point. Energy retailers have to register as ‘customers’ of the NEM, but the businesses and households that purchase electricity from those retailers don’t. (If they did, of course, there would be millions of registered NME participants, not hundreds.)
  • Network service provider (NSP) – Anybody who owns, operates or controls a transmission or distribution system for electricity has to register as an NSP, unless they meet similar exemption criteria as described above for generators.
  • Reallocator – A ‘reallocation transaction’ occurs when two registered participants enter into a contract between themselves to have the AEMO credit one with a positive trading amount for a trading interval, and the other with a matching negative amount. This usually represents an ‘off-market’ commitment, like a ‘hedge contract’ – a contract for a generator to sell electricity to a retailer at a set price, regardless of the fluctuating market price. Anyone who wants to participate in one of these transactions must also be registered as a reallocator.
  • Trader – Settlements Residue Auctions (SRAs) give registered participants the chance to bid on ‘settlements residue’ (the difference between the amount paid by participants to the AEMO for spot market transactions, and the amount paid by the AEMO to other participants for spot market transactions). Bidding is financially speculative, and carries a number of risks. Anyone who wants to take part in one of these auctions who isn’t already registered as a customer or generator has to
    register as a trader.
  • Metering coordinator – A registered participant responsible for coordinating and providing metering services (i.e. measuring the amount of electricity consumed) at connection points in the NEM. Market ancillary service provider (MASP) – Ancillary services delivered by MASPs are used by the AEMO to manage the power system safely, securely and reliably. These services are responsible for maintaining the system, including system restart processes after a major supply disruption.
  • Intending participant – A person, business or organisation that can ‘reasonably satisfy’ the AEMO that it intends to carry out an activity that can only be done by a registered participant can apply to be registered as an ‘intending participant’. Successful applicants are granted access to certain data under the National Electricity Rules (NER).

Want to find out if a specific person or organisation is a registered participant in the NEM?

The AEMO maintains a current registration and exemption list containing all registered participants in the NEM, as well as registration applicants, registrations that are ceasing or suspended, and registration exemptions.