Congestion management within the Australian National Electricity Market

The paper presents a market-oriented review of the arrangements within the Australian National Electricity Market (NEM) for management of transmission network congestion. It asserts that as result of the combination of governance and market design the arrangements work satisfactorily, but not perfectly, in the short term, but less so in the longer-term. The reasons for this are described and an overview of work in hand to further refine the arrangements is presented. A brief summary of the key elements of the Australian market is provided as background. The paper notes that the NEM benefits from being a single unified market covering all parts of the interconnected network and thus does not suffer from "seams" issues or need to accommodate "through flows" from other pools. As a result it has been possible to give significant attention to a wide range of behavioural incentives to enhance efficiency. Where problems exist the most common cause identified is the lack of alignment between regulatory and competitive elements of the NEM and to a lesser extent between different authorities.