Post 2025 Market Design – Capacity mechanism – High-level design consultation paper – June 2022

The Energy Security Board (ESB) has released a paper outlining its proposed high-level design of a capacity mechanism for the National Electricity Market (NEM).

As part of the Post-2025 market reforms, Energy Ministers tasked the ESB with progressing detailed design work on a mechanism that specifically values capacity in the NEM. The ESB’s high level design paper builds on stakeholder feedback received on the scope of works document and project initiation paper, which were released in December 2021, and the ESB’s further design work. The ESB has also been guided by the principles agreed to by Energy Ministers in September 2021.

The paper outlines the ESB’s preferred approach to key design choices, including:

• who is eligible to participate
• the degree of centralisation of forecasting and procurement
• the nature of the obligation placed on capacity providers in return for a capacity payment
• the role of interstate trade
• how costs are passed through to customers.

The ESB sought stakeholder feedback on its high level design and the issues raised in the paper. Submissions closed on 25 July 2022 and are linked below.

The ESB will continue working with stakeholders on developing the final design. The ESB will develop a draft detailed design by the end of the year with a final recommendation due to Ministers early in 2023.