I’m sure that all of our readers would acknowledge that the underlying physical grid that supports the Australian National Electricity Market is an interconnected machine. A lower percentage of our readers will understand more of the arcane details of how the mainland regions all spin in synchronisation at 3,000rpm – and that this interconnectedness can lead to (less obvious, and probably) unintended consequences if certain changes are made, or actions are taken.
In the same way, at a commercial level, each dispatch interval within the NEM (though technically dispatched separately) are all interconnected, not just in time, but also in terms of “because this happened at this time, that is more likely to happen at another point in time”, and this rolls up into larger time slices:
Take, for instance, this example of how short term volatility in the underlying physical (i.e. AEMO-managed) market flows through to high prices for hedge contracts at a distinctly different but still interrelated, point in time.
This interconnectedness seems (perversely):
1) To occur quite often; and yet
2) To be comparatively often overlooked, in terms of potential unintended consequences emerging because of changes affecting the market at another point in time.
This is another post I hope to flesh out in more detail at a later opportunity, but need to flag today.