The AEMC-established technical working group on grid access reform held its ninth meeting last week on the impact of grid access reform on contract market liquidity. The meeting addressed the ways in which the proposed reform design is intended to preserve contract market liquidity.

The technical working group is a key part of the grid access reform work the AEMC is leading as part of the Energy Security Board’s post 2025 market design process. This work is fundamental to better integrating new technologies into the national grid. Reforming grid access is crucial to ensuring the rapid change in Australia’s power system is cheaper, faster and fairer across the board. 

During the course of the year, we are working with stakeholders to inform our thinking as we refine the model for access reform. This work has emerged from the AEMC’s Coordination of Generation and Transmission Investment (COGATI) review.

The subject of the latest technical working group was on contract market liquidity and how key aspects of the design work to preserve and enhance liquidity in the contract market. The meeting focused on liquidity in relation to two markets:

• The liquidity of trade in existing contract market instruments
• The liquidity of trade in financial transmission rights (FTRs). 

The creation of FTRs are a key plank of the proposed grid access reform. They would give generators a risk management tool to lessen uncertainty about the profit they would make. 

At the meeting some of the issues discussed include the impact of the following on the contract market:

• FTR firmness,
• whether the regional reference price is retained or whether we move to a volume weighted average price and
• the transitional allocation of FTRs.

In addition, the group discussed the availability of inter-regional FTRs, which would preserve and potentially enhance contract market liquidity across different regions of the NEM. 

The group also discussed key reform design elements having a bearing on the liquidity of trade in FTRs, including whether non-physical participants should be able to take part in the auction of FTRs, the types of FTR instrument provided in the auction and provisions to allow for the emergence of a liquid secondary market. 

Discussion notes and materials from the technical working group are now available. A record of questions asked at the technical working group will also be forwarded to TWG members. 

The technical working group includes representatives from consumer groups, energy investors, large consumers, generators, transmission businesses, retailers, the Energy Security Board and market bodies. The group has also now expanded to include members of the ESB technical working group on the post 2025 market design process. 

Anyone who would like to meet with us to discuss the technical working group and the issues and questions raised can contact Russell Pendlebury. 

Media: Kellie Bisset, Media and Content Manager, 0438 490 041 or (02) 8296 7813