The challenge

Assessing the effectiveness of an evolving market

Energy Policy WA (EPWA) provides policy advice to the Coordinator of Energy and government to facilitate the delivery of secure, reliable, sustainable and affordable energy services to Western Australians.

Rennie was engaged to support EPWA with the preparation of the triennial review of the effectiveness of the Wholesale Electricity Market (WEM) in meeting the State Electricity Objective, culminating in a report that must be provided from the Coordinator of Energy to the WA Energy Minister. The scope of the review, which is set out in the Electricity System and Market Rules (ESMR), includes analysis on the functioning of the market and the effectiveness of certain functions performed by central market bodies. This review occurred soon after a major overhaul of the design of the WEM, and in the midst of concurrent market reforms.

Our solution

Collaborative development of proactive recommendations

Rennie analysed the effectiveness of market bodies in the performance of their functions, synthesising information from public reports, interviews and information requests, and benchmarking against industry peers to identify best practices. This enabled an assessment using a rating system agreed with EPWA, and the development of recommendations targeted at improvement opportunities.

This work was complemented by a quantitative market trends analysis to identify patterns and insights across the transition from old to new market design, and examination of specific market design issues that had been raised by stakeholders during the scoping process for the review.

Rennie worked collaboratively with EPWA to draft the report for the Minister, setting out recommendations to increase the effectiveness of the WEM based on analysis findings.

Our impact

Evidence-backed recommendations to support market effectiveness

EPWA presented the summary report for the review to the Minister for Energy, after which it was published. EPWA will work with the relevant market bodies to implement the report’s recommendations.

Key insights

• Transparency is vital to enable market participants to make effective and efficient investment decisions, and to operate in the market with clarity and confidence. Numerous opportunities were identified through the review to boost transparency, including in relation to market data and related information, network planning and capacity information, and surveillance and enforcement activities.

   

• Explicitly linking the State Electricity Objective to specific functions in the Electricity System and Market Rules could help to focus the performance of those functions in ways that boost the effectiveness of the WEM