Working papers

Providing timely research output and knowledge transfer to industry and government stakeholders

CAEEPR’s members are energy companies, government agencies and policy makers who actively guide the research agenda and input into the assumptions used in modelling policy positions. Access to world-class journal articles and their authors promotes implementation of CAEEPR’s applied research to its network of industry and government, and deeper understanding of the implications of policy changes and decarbonisation pathways.

Featured papers

Project finance with Asian wind swaps: are ‘average price’ derivatives bankable in Australia’s NEM?

Paul Simshauser

This paper examines how fungible derivative contracts can manage earnings risk for renewable generators in Australia’s National Electricity Market. Using 85 weather-year simulations of a projected 2033 market, it compares shape and revenue swaps across three representative wind farms. The findings show revenue swaps provide stronger downside protection, supporting semi-merchant investment while preserving liquid, transferable markets.

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How effectively can fungible financial derivative contracts hedge wind farm earnings, and what level of cover is efficient?

Tahlia Nolan, Tim Nelson and Joel Gilmore

This paper examines whether standardised, tradeable derivative contracts can effectively hedge wind farm earnings in Australia’s National Electricity Market. Using 85 historical weather-year simulations, the authors compare alternative hedging approaches and find that fungible contracts can significantly reduce earnings volatility, with revenue swaps often providing protection comparable to traditional power purchase agreements.

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Stay or leave: How contracts shape the future grid

Peyman Akhgar, Anis ur Rehman, Mohammad J Sanjari and Magnus Soederberg

This paper examines how distributed energy resources are reshaping households’ ties to the electricity grid. Using a two-stage model, it shows that broader contract options help retain customers, batteries act as a hedge against cost and outages, and full disconnection is most likely in remote areas—highlighting the importance of contract design alongside technology costs.

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Papers by year

2026 Papers

Title	Author(s)	Description
Project finance with Asian wind swaps: are ‘average price’ derivatives bankable in Australia’s NEM?	Paul Simshauser	This paper examines how fungible derivative contracts can manage earnings risk for renewable generators in Australia’s National Electricity Market. Using 85 weather-year simulations of a projected 2033 market, it compares shape and revenue swaps across three representative wind farms. The findings show revenue swaps provide stronger downside protection, supporting semi-merchant investment while preserving liquid, transferable markets.
How effectively can fungible financial derivative contracts hedge wind farm earnings, and what level of cover is efficient?	Tahlia Nolan, Tim Nelson and Joel Gilmore	This paper examines whether standardised, tradeable derivative contracts can effectively hedge wind farm earnings in Australia’s National Electricity Market. Using 85 historical weather-year simulations, the authors compare alternative hedging approaches and find that fungible contracts can significantly reduce earnings volatility, with revenue swaps often providing protection comparable to traditional power purchase agreements.
Stay or leave: How contracts shape the future grid	Peyman Akhgar, Anis ur Rehman, Mohammad J Sanjari and Magnus Soederberg	This paper examines how distributed energy resources are reshaping households’ ties to the electricity grid. Using a two-stage model, it shows that broader contract options help retain customers, batteries act as a hedge against cost and outages, and full disconnection is most likely in remote areas—highlighting the importance of contract design alongside technology costs
Risk-aware battery arbitrage optimisation using Quantile-Based Price Forecast Error Adjustment	Parna Imannezhad, Magnus Soederberg, Neda Todorova, Phillip Wild	Battery operators face revenue risks from volatile, imperfect price forecasts. This paper proposes a risk-aware optimisation framework using quantile-based historical forecast errors to adjust predispatch signals and guide charge-discharge decisions. A dispatch layer preserves reserves for extreme events. Tested on 12 days in Australia’s NEM (2025), it improves revenue outcomes and redistributes risk compared to baseline strategies.
Coordinating coal plant closures: transient strategic reserves in transitioning energy-only markets	Paul Simshauser	This article examines instability in Australia’s National Electricity Market following coal plant closures and slowed renewable investment. It proposes a temporary “strategic reserve” to support reliability and stabilise prices during the transition. Modelling shows this low-intervention approach reduces volatility, preserves market integrity, and improves investment confidence in both renewable and dispatchable energy capacity.
Caps-and-Floors for Long Duration Storage and Firming: Contract Design under Risk and Price Asymmetry	Farhad Billimoria and Paul Simshauser	This article examines the design and valuation of cap-and-floor hedge contracts in hybridised electricity markets, with a focus on their interaction with merchant price risk and project finance structures.
Draft 2025-2026 GenCost Consultation Submission	Andrew Fletcher	GenCost is an annual collaboration between CSIRO and AEMO to update current and projected costs of new-build electricity generation, storage and hydrogen production out to 2050. The submission identifies several opportunities to improve the modelling of key technologies that are selected in AEMO’s 2026 Draft Integrated System Plan optimal development path including onshore wind, utility scale solar PV, utility scale BESS and electrolysers.
Forecasting Assumptions Update	Andrew Fletcher	AEMO’s Draft 2026 Forecasting Assumptions Update provides updated consumer energy resource projections (electric vehicles, solar PV and batteries) to be used in AEMO’s 2026 Electricity Statement of Opportunities (ESOO). The submission provides detailed feedback to AEMO and appointed consultants, identifying several opportunities to improve accuracy, transparency and policy‑alignment of consumer energy resource uptake modelling.
Forecasting Accuracy Report	Andrew Fletcher	AEMO’s 2025 Forecast Accuracy Report assesses demand and supply forecast accuracy from the 2024 Electricity Statement of Opportunities across all NEM regions, with the 2025 Forecast Improvement Plan consultation focuses on proposed improvements to reliability and demand forecasts. The focus of this submission is identifying areas where accuracy and transparency of how consumer energy resources operating profiles are developed could be improved, including by incorporating better data, so that how these resources interact with the electricity system can be more accurately represented in AEMO’s Electricity Statement of Opportunities and Integrated System Plan.
Alternative contract design; analysing the bankability of fungible derivative contracts in energy-only markets	Nicholas Gohdes, Tim Nelson, Phillip Hirschhorn	With the retirement of 21GW of legacy coal fleet looming, the task to replace Australia’s thermal capacity with firmed renewable ‘bulk energy’ solutions is non-trivial. Indeed, calibrating necessary capital investment in new plant stock with efficient economic outcomes, vis-à-vis cost and reliability, represents a fundamental challenge to the ‘dynamic efficiency’ ideal for energy-only markets.

2025 Papers

Title	Author(s)	Description
Are gas turbines ‘bankable’ in transitioning energy-only markets?	Paul Simshauser	From their inception, the energy-only electricity market design has been characterised by policymaker concerns of resource adequacy. Spot market price ceilings set too low and lacking a clear nexus with reliability criteria, capricious regulatory interference into otherwise legitimate scarcity pricing events, and a lack of demand-side participation are all thought to make the task of timely entry of requisite reserve plant intractable, and therefore ‘un-bankable’.
Crew and Kleindorfer Effect Revisited: Impacts of Network Revenue Caps on Energy Market Competition and Consumer Welfare	Richard Meade	Revenue cap regulation is increasingly used in energy network monopolies, despite longstanding concerns it can induce regulated firms to set super-monopoly prices – the so-called Crew and Kleindorfer Effect. This effect is replicated when energy demand is a function of both regulated transportation prices and imperfectly competitive energy prices.
The Counterfactual Scenario: are renewables cheaper?	Paul Simshauser and Joel Gilmore	In 2021 the average household electricity tariff in the National Electricity Market was ~23c/kWh. By 2025, tariffs had increased 33% to ~30c/kWh. Australians were told renewables would be cheaper, yet electricity bills had risen sharply. Are renewables cheaper? In this article, we focus on the wholesale market component of retail electricity tariffs and examine a counterfactual scenario – a world where market entrants were coaland gas-fired generation rather than renewables.
Non-Technical Summary. The Counterfactual Scenario: are renewables cheaper?	Paul Simshauser and Joel Gilmore	This non-technical summary of The Counterfactual Scenario: Are Renewables Cheaper? outlines key insights from the full working paper. It explains how the Russia-Ukraine war disrupted gas markets, raising energy costs in Australia, and how, despite higher renewable costs, they remain cheaper than new coal or gas alternatives.
Appendix. The Counterfactual Scenario: are renewables cheaper?	Paul Simshauser and Joel Gilmore	The appendix of The Counterfactual Scenario: Are Renewables Cheaper? provides detailed modelling and assumptions underpinning the paper’s findings. It supports the main analysis by comparing renewable, coal, and gas scenarios, reinforcing that renewables with firming remain the lowest-cost option despite recent global disruptions.
Stage 2 Draft 2025 IASR Consultation submission	Andrew Fletcher	The Draft 2025 Inputs, Assumptions and Scenarios Report (IASR) contains the scenarios, inputs and assumptions proposed for use in AEMO’s 2024-25 forecasting and planning activities, including the 2026 ISP and regulatory investment test for transmission (RIT-T). The submission identifies several opportunities to improve the IASR and underlying consultant modelling reports. The submission includes recommendations relating to biomethane recoverable resource and cost assumptions, renewable installation cost escalation factors, hydrogen demand in road transport and demand flexibility assumption for green hydrogen use cases.
Social Preferences and Environmental Externalities	Pol Campos-Mercade, Claes Ek, Magnus Söderberg, Florian H. Schneider	Standard economic theory assumes that individuals ignore the externalities they create, such as emissions from burning fossil fuels and generating waste. In an incentivized study (N = 3, 718), we find that most people forgo substantial gains to avoid imposing negative externalities on others. Using administrative data on household waste, we show a clear link between such prosociality and waste behavior: prosociality predicts lower residual waste generation and higher waste sorting.
Draft ISP Methodology Consultation	Andrew Fletcher	This submission addresses two key areas of importance to future energy system planning: (1) the treatment of imperfect foresight, particularly in relation to medium- and long-term weather forecasting errors, and (2) the appropriate period for hydrogen production targets.
Renewable Energy Zones: generator cost allocation under uncertainty	Paul Simshauser and Evan Shellshear	Renewable Energy Zones (REZ) and the associated transmission network infrastructure are an important policy development in Australia’s transitioning electricity market. REZs form the basis upon which to expand the renewable hosting capacity of the National Electricity Market (NEM) at scale, while simultaneously minimising the footprint of infrastructure – noting community, cultural heritage and environmental (i.e. biodiversity) sensitivities.
On spot revenues, capital structure and trade off theory: Analysing investment risk for contracted renewables	Nicholas Gohdes	In decarbonising power systems, shifting dynamics require that investors lend careful consideration when structuring plant revenues – or risk violating the constraints of private capital markets. In Australia’s National Electricity Market, new variable renewable energy (VRE) plant was traditionally ~100% revenue contracted via power purchase agreement (PPA) to facilitate bankability and provide stable returns.
2024-25 GenCost Consultation Submission	Andrew Fletcher	GenCost is an annual collaboration between CSIRO and AEMO to update the costs of new-build electricity generation, storage and hydrogen production out to 2050. While GenCost has a robust methodology and proven theoretical underpinnings in learning-by-doing, the submission identifies several opportunities to improve GenCost. Recommendations are focussed on increasing transparency and improvements to the modelling of key technologies that are included in the 2024 AEMO ISP’s optimal development path including onshore wind, OCGT, utility scale BESS, rooftop solar PV and electrolysers.
Draft 2025 IASR Stage 1 Consultation submission	Andrew Fletcher	The Draft 2025 Inputs, Assumptions and Scenarios Report (IASR) contains the scenarios, inputs and assumptions proposed for use in AEMO’s 2024-25 forecasting and planning activities, including the 2026 ISP and regulatory investment test for transmission (RIT-T). The submission identifies several opportunities to improve the IASR and underlying consultant modelling reports. The submission includes recommendations relating to customer energy resources, preferred Green Energy scenarios variant, alumina industry growth in Green Energy scenario, hydrogen modelling, locational factors and demand side participation.
Electricity prices and preferences for climate and energy policy	Petyo Bonev, Magnus Söderberg, and Mattias Vesterberg	We analyse the impact of high electricity prices on individual preferences and attitudes toward climate and energy policy in Sweden. Our identification strategy leverages key features of the data and study design. First, consumers are distributed across four electricity price areas, each characterized by varying and often divergent electricity prices. Second, surveys were conducted in four distinct waves. Notably, between the second and third waves, electricity prices were nearly identical across price areas, whereas after the third wave, significant price differences emerged.
A penalization approach for estimating inefficiency in stochastic frontier panel models	Firmin Doko Tchatoka, Magnus Söderberg, Mohammad Abbas Hakeem	Efficiency analysis is crucial for evaluating the performance of entities that provide essential and other homogenized services. The Jondow et al.’s (1982) estimator is widely used but has been criticized for biasing inefficiency toward its mean, distorting the distribution, and misrepresenting the conditional distribution of inefficiency, particularly in cross-sectional settings. Zeebari et al. (2023) propose a regularization approach that aligns sample and theoretical moments but it is primarily suited to cross-sectional data.

2024 Papers

Title	Author(s)	Description
The Forward Market Dilemma in Energy-Only Electricity Markets	Jonty Flottmann, Paul Simshauser, Phillip Wild, Neda Todorova	Spot prices in energy-only markets, particularly those with high market price caps, are inherently volatile. As a result, the forward market for hedge contracts is a crucial design feature which guides systemic stability and allows the adequate operation of competitive wholesale and retail markets.
Policy sequencing: on the electrification of gas loads in Australia’s National Electricity Market	Paul Simshauser and Joel Gilmore	Decarbonising our power systems requires coal plant to exit and be replaced by intermittent renewables, along with a diversified fleet of flexible firming plant capacity (viz. batteries, pumped hydro, gas turbines). It also requires electrification of the gas market. In Australia’s National Electricity Market, certain jurisdictions have sought to pursue power system decarbonisation and electrification of gas loads simultaneously. APPENDICES available below.
APPENDICES - Policy sequencing: on the electrification of gas loads in Australia’s National Electricity Market	Paul Simshauser and Joel Gilmore	J-Solve is a least-cost expansion planning and constrained dispatch model for an interconnected electricity system. Optimal welfare will be reached by minimising the sum of plant stock capital costs, production costs, and any costs of unserved energy. The optimisation determines the generating capacity (and if applicable storage capacity) of each unit, and its corresponding generation (and charging) in each period, as well as the amount of unserved energy or curtailed negative demand in each period.
Impact of Ownership Type on Electricity Distribution Utility Performance: Evidence Using Value for Money Perceptions of Swedish Consumers	Darryl Biggar, Richard Meade, Magnus Söderberg	This paper examines which ownership arrangement is best for a natural monopoly network. Three broad classes of owners are considered: (i) investors; (ii) local governments (i.e. municipalities); and (iii) customers. Comparing the performance of differently-owned firms can be complicated by firms choosing different price-quality trade-offs, making direct comparisons impossible
The implications of battery integration for variable renewables in the Australian national electricity market	Parna Imannezhad, Magnus Soederberg, Philip Wild	Renewable projects in Australia have depended on Power Purchase Agreements (PPAs) or Contracts-for-Differences (CFDs) to manage merchant risk and to guarantee revenue certainty. This study investigates to what extent lithium-ion batteries can be a substitute to CFDs and PPAs for a developer of a merchant wind farm portfolio in Australia’s National Electricity Market (NEM).
2026 ISP Methodology Consultation – Issues Paper	Andrew-Fletcher, Huyen Nguyen	Published every two years, AEMO’s ISP is a roadmap for the transition of the NEM power system. The ISP is underpinned by an integrated approach to energy market modelling and power system analysis, detailed in the ISP Methodology. The submission to the 2026 ISP Methodology Consultation makes recommendations relating to the modelling of industrial demand flexibility, hydrogen, weather forecasting uncertainty and wind resources.
The Interplay of Carbon Offset, Renewable Energy Certificate and Electricity	Ling Liao, Ivan Diaz-Rainey, Duminda Kuruppuarachchi	Having the world’s first renewable energy certificate (REC) market and a large and diverse (by project types) government-backed carbon offsets (ACCUs) market, Australia provides an interesting context to study the interplay of the offset, REC, and electricity market.
Competition vs. Coordination: Optimising Wind, Solar and Batteries in Renewable Energy Zones	Paul Simshauser	Decarbonising Australia’s power system requires high market shares of variable renewable energy. An important policy initiative to achieve this is the establishment of Renewable Energy Zones (REZs). As renewable market share increases, spilled energy within REZs is predictable.
2024 Electricity Demand Forecasting Methodology Consultation - Submission to AEMO	Andrew-Fletcher, Huyen Nguyen	This submission has been prepared by Andrew Fletcher and Huyen Nguyen, who are Industry Adjunct Research Fellows at CAEEPR. The views expressed in this submission are entirely the authors’ and are not reflective of CAEEPR.
An evaluation of TOU-tariffs: a literature review and an open-source simulation tool	Magnus Söderberg	Time-of-Use (ToU) tariffs is currently on many policy-makers agenda. Two of the most fundamental challenges in the implementation these tariffs are what price levels to use and at what times the prices should shift up and down. Recently a number of dynamic tariffs have been evaluated by using randomized control trials, which has increased the confidence in what effect these tariff structures have on demand
TOU-tariffs open-source simulation tool	Magnus Söderberg	A simple, open-source ToU simulator is provided as a supplementary file to the "An evaluation of TOU-tariffs: a literature review and an open-source simulation tool" paper.
Levelised cost of dynamic green hydrogen production: A case study for Australia's hydrogen hubs	Mostafa Rezaei, Alexandr Akimov, Evan MacA. Gray	This study evaluates the levelised cost of hydrogen (LCOH) dynamically produced using the two dominant electrolysis technologies, directly connected to wind turbines or photovoltaic (PV) panels in regions of Australia designated as hydrogen hubs. Hourly data are utilised to size the components required to meet the hydrogen demand.
Solving for ‘y’: demand shocks from Australia’s gas turbine fleet	Paul Simshauser and Joel Gilmore	The long run task of Australian power system planners is to identify the structural adjustment pathway associated with retiring the National Electricity Market (NEM) coal fleet. System planning models seek to do this at minimum cost subject to a reliability constraint. This involves the deployment of low-cost intermittent wind and solar resources with a mix of dispatchable, flexible, ‘firming’ assets.
On the 3-Party Covenant Financing of ‘Semi-Regulated’ Pumped Hydro Assets	Paul Simshauser and Nicholas Gohdes	All credible scenarios of a decarbonising Australian power system with high levels of renewables rely on a portfolio of flexible, dispatchable storage and firming assets. Given our current understanding of costs and prices, such portfolios are thought to include shortduration batteries, intermediate-duration pumped hydro, and gas turbines acting as a last line of defence against intermittency.
Draft-2024-ISP-Consultation-Submission	Andrew Fletcher and Huyen Nguyen	This submission to the Draft 2024 ISP Consultation is informed by the CAEEPR techno-economic research that assesses the cost of Queensland green hydrogen and green ammonia energy infrastructure options in collaboration with the University of Oxford's Oxford Green Ammonia Technology research group. A submission to the 2024 Forecasting Assumptions Update Consultation has been made on the 9th of February 2024.
Forecasting-Assumptions-Update-Consultation-Submission	Andrew Fletcher and Huyen Nguyen	This submission to the 2024 Forecasting Assumptions Update Consultation is informed by the CAEEPR techno-economic research that assesses the cost of Queensland green hydrogen and green ammonia energy infrastructure options in collaboration with the University of Oxford's Oxford Green Ammonia Technology research group.
Economics of renewable hydrogen production using wind and solar energy: A case study for Queensland, Australia	Mostafa Rezaei, Alexandr Akimov, Evan MacA. Gray	This study presents a technoeconomic analysis of renewables-based hydrogen production in Queensland, Australia under Optimistic, Reference and Pessimistic scenarios to address uncertainty in cost predictions. The goal of the work was to ascertain if the target fam-gate cost of AUD 3/kg (approx. USD 2/kg) could be reached.

2023 Papers

Title	Author(s)	Description
Electricity contract design and wholesale market outcomes in Australia’s National Electricity Market	Tim Nelson, Stephanie Easton, Lewis Wand, Joel Gilmore and Tahlia Nolan	The emergence of variable renewable energy (VRE) technologies has created a range of different energy contracting techniques. Within Australia’s National Electricity Market (NEM), Run-of-Plant (RoP) Power Purchase Agreements (PPAs) became the most common form of contract with purchasers of wind and solar energy agreeing to pay a fixed price for energy irrespective of when it is produced and therefore its actual value to the market.
Queensland green ammonia value chain: Decarbonising hard-to-abate sectors and the NEM - Main report	Andrew Fletcher, Huyen Nguyen, Nicholas Salmon, Nancy Spencer, Phillip Wild and Rene Bañares-Alcántara	Fossil fuel-based ammonia production currently accounts for around 1% of global greenhouse gas emissions. Ammonia is one of the few hydrogen use cases where no real alternatives exist. Green ammonia could play a pivotal role in decarbonising fertilisers and explosives, that are critical inputs into Australia’s agriculture and resources sectors respectively.
Queensland green ammonia value chain: Decarbonising hard-to-abate sectors and the NEM - Information sheets	Andrew Fletcher, Huyen Nguyen, Nicholas Salmon, Nancy Spencer, Phillip Wild and Rene Bañares-Alcántara	This report assesses the design of infrastructure required for a world-scale Queensland green ammonia industry (multiple 1mtpa NH3 capacity plants) with value chain costs estimated for supplying (a) green hydrogen and (b) green ammonia, to meet variable and fixed customer demand profiles
Contracts-for-Difference: An assessment of social equity considerations in the renewable energy transition	Tim Nelson, Tracey Dodd	This research advances knowledge regarding social equity as it relates to electricity network charges, renewable investments, and household income. While much research has examined social equity issues related to electricity access, research has yet to fully explore how different network tariff designs used to recover the cost of renewable energy investments, such as those related to ‘Contracts-for-Difference’ (CfDs), impact low-income individuals.
Effective policy to achieve the Australian Government’s commitment to 82% renewable energy by 2030	Tim Nelson, Tahlia Nolan and Joel Gilmore	Australian climate change policy has been fraught for at least two decades. Around a decade ago, Nelson et al (2010) estimated that carbon policy uncertainty would result in electricity prices being $8.60 per MWh higher than necessary. Sadly, the study significantly underestimated both the policy gyrations that would occur and the associated costs.
Unhedged risk in hybrid energy markets: Optimising the revenue mix of Australian Solar	Nicholas Gohdes	Australia is facing a historic investment challenge, with an estimated $1.2 to $1.5 trillion in newly invested capital required by 2030 in order to meet 2050 decarbonisation targets. In response policy makers have begun “re-entering” energy markets, which were deregulated and privatised in the 1990’s.
Non-Firm vs. Priority Access: on the Long Run Average and Marginal Cost of Renewables in Australia	Paul Simshauser, David Newbery	Australia’s National Electricity Market (NEM) has experienced a rapid expansion of Variable Renewable Electricity (VRE) projects, not without obstacles. Entry frictions such as movements in Marginal Loss Factors and/or network congestion adversely impacted ~15% of new projects. Are these the expected results in a workably functioning market, or due to market design defects?
On Static vs. Dynamic Line Ratings in Renewable Energy Zones	Paul Simshauser	Scaling-up Variable Renewable Energy will face critical bottlenecks vis-a-vis requisite transmission hosting capacity. Network developments must navigate the complexity of encroaching on private land, risk disturbing sites of cultural significance, compete with other environmental (i.e. biodiversity) objectives, and endure backlash from directly affected communities.
On the impact of targeted and universal electricity concessions policy on fuel poverty in the NEM’s Queensland region	Paul Simshauser, Wendy Miller	In Australia’s National Electricity Market (NEM), households have faced markedly higher electricity prices following the 2022 war in Ukraine and subsequent energy crisis. Forward prices for coal and gas increased sharply, trading at multiples of historic averages.While initially sheltered to wholesale price shocks through regulatory lag, retail electricity tariffs rose by more than 30% for the 2024 financial year
Leveraging Data Portals as Analytic Platforms: A Case Study of a Simulation of the Queensland Energy and Jobs Plan	William Paul Bell, Nancy Spencer	This paper discusses how researchers can augment their traditional publications and share their large research datasets in a format easily analysed by other researchers, while enhancing their own analytic capabilities. The case study is the Queensland Energy and Jobs Plan, and the data portal implemented using Power BI.
Renewable Hydrogen requirements and impacts for network balancing	Phillip Wild, Lucas Skoufa, Nancy Spencer	Hydrogen is the gas of the moment: an abundant element that can be created using renewable energy, transported in gaseous or liquid form, and offering the ability to provide energy with only water vapour as an emission. Hydrogen can also be used in a fuel blend in electricity generation gas turbines providing a low carbon option for providing the peak electricity to cover high demand and firming.
Derivatives and Hedging Practices in the Australian National Electricity Market	Jonty Flottmann, Phillip Wild, Neda Todorova	This article expands on the seminal policy work by Anderson et al. (2007) and explores the impacts of a changing energy mix on derivatives and hedging practices 15 years on from their work in the Australian National Electricity Market (NEM). The Australian electricity market has undergone vast change since 2007 as increasing amounts of variable renewable energy (VRE) has entered the market.
Locational and market value of Renewable Energy Zones in Queensland	Paul McDonald	Efficient coordination in transmission planning and locating variable renewable energy (VRE) generation is important in transitioning to a low carbon electricity system. Renewable Energy Zones (REZ) provide an opportunity to strategically augment and expand the existing transmission network to maximise use the available renewable resources.
The regulation of electricity transmission in Australia’s National Electricity Market: user charges, investment and access	Paul Simshauser	The Australian Electricity Supply Industry was dominated by state-owned, vertically integrated monopoly utilities through to the 1990s reform era. It was during these reforms that electricity transmission networks were structurally separated from generation (i.e. vertical restructuring).
Rooftop solar PV, coal plant inflexibility and the minimum load problem	Paul Simshauser and Phillip Wild	The feasibility of dispatch under ever-expanding rooftop solar PV resources is examined in the NEM’s Queensland region with minimal demand elasticity. Resolution requires Australia’s energy-only market to navigate inflexible coal plant exit, and flexible battery and gas turbine plant entry.
Renewable investments in hybridised energy markets: optimising the CfD-merchant revenue mix	Nicholas Gohdes Paul Simshauser Clevo Wilson	Energy markets were designed to maximise productive, allocative and dynamic efficiency. Although renewables have become the dominant investment in deregulated energy markets, decarbonisation may not proceed at a pace consistent with the aspirations of policymakers.
Contract design for storage in hybrid electricity markets	Farhad Billimoria and Paul Simshauser	By establishing six principles for government-initiated contracting and examining the incentive compatibility of storage contract designs, it is found that structural simplicity in contract design could introduce incentive incompatibility.
The 2022 Energy Crisis: horizontal and vertical impacts of policy interventions in Australia’s National Electricity Market	Paul Simshauser	Price increases before- and after- policy interventions are analysed. The Queensland Government hardship policy remains vitally important making a 3.2 percentage point impact on underlying level of energy poverty.

2022 Papers

Title	Author(s)	Description
The role of gas price in wholesale electricity price outcomes in the Australian National Electricity Market	Tahlia Nolan, Joel Gilmore, and Jack Munro	Will the correlation between gas and electricity prices in the NEM continue under the current extreme commodity prices and the transition to a net-zero emissions grid?
Economies of scale and (the lack of) consolidations in the Swedish electricity distribution market	Magnus Söderberg & Mattias Vesterberg	Economies of scales are expected in natural monopoly markets. Extending this concept in application to the Swedish electricity distribution market highlights that DSOs could reduce their costs substantially.
Quantifying the risk of renewable energy droughts in Australia’s National Electricity Market (NEM) using MERRA-2 weather data	Joel Gilmore, Tim Nelson, and Tahlia Nolan	What is the real-time instantaneous and medium term production risk in the NEM supplied solely by VRE?
The sunshine state: cause and effects of mass rooftop solar PV take-up rates in Queensland	Paul Simshauser, Tim Nelson and Joel Gilmore	The cause and effects of the rapid take-up of behind-the-meter rooftop solar PV by Queensland households indicate participating households are benefitting, while hidden costs remain for non-participants. Impacts on utilities are mixed, with retail supply businesses most adversely affected.
Dividends Regulated	Paul Simshauser	An analysis of the dividend policy and market valuations of the listed regulated utilities in the context of a falling
The Levelised Cost of Frequency Control Ancillary Services in Australia’s National Electricity Market	Joel Gilmore, Tahlia Nolan and Paul Simshauser	The paper develops an approach for quantifying long run equilibrium prices in the markets for Frequency Control Ancillary Services (FCAS), with the intended application being to guide the suitability of utility-scale battery investments under conditions of uncertainty and missing forward FCAS markets.
VRE Revenue Quality	Nicholas Gohdes and Paul Simshauser	Under conditions of policy uncertainty in NEM, higher credit quality drives higher gearing, and lower expected returns to equity resulting in higher post-construction VRE plant valuations demonstrating the repackaging and reallocation of risk.
Network Regulation under Electoral Competition	Anke Leroux and Magnus Söderberg	Modern regulatory approaches are criticised for their apparent failure to achieve competitive pricing and for not including customers voices. By extending well-known regulatory laboratory experiments, electoral competition, when implemented jointly with incentive regulation, can push prices down quicker to the welfare maximising level.

2021 Papers

Title	Author(s)	Description
Regularized Conditional Estimators of Unit Inefficiency in Stochastic Frontier Analysis, with Application to Swedish Electricity Distribution Market	Zangin Zeebari, Kristofer Månsson, Pär Sjölander, and Magnus Söderberg	The value of Stochastic Frontier Analysis (SFA) increases when the level of accuracy at which it estimates unit-specific inefficiencies improves. Based on Swedish electricity distribution data, conventional conditional estimators and regularized conditional estimators provide substantially different results for highly inefficient companies.
Australian household adoption of solar photovoltaics: A comparative study of hardship and non-hardship customers	Tim Nelson and Tracey Dodd	This work proposes a new organizational and financial structure to account for the net present value of installing solar PV systems for low-income tenants to reduce annual grid-based electricity consumption and lower greenhouse emissions.
Rooftop solar PV and the peak load problem in the NEM’s Queensland region	Paul Simshauser	In this article the partial equilibrium framework is used to define conventional plant ‘dis-investment’ in the presence of rising rooftop solar PV and utility-scale renewables but requires frictionless coal plant divestment and bounded negative price offers.
Optimising VRE plant capacity in Renewable Energy Zones	Paul Simshauser, Farhad Billimoria & Craig Rogers	Examines the development of Renewable Energy Zones (REZ) as a means to guide forward market commitments and produce greater coordination between generation and transmission plant investments, exploring various definitions of a ‘fully subscribed REZ’ in Southern Queensland.
What’s next for the Renewable Energy Target– resolving Australia’s integration of energy and climate change policy?	Tim Nelson, Tahlia Nolan and Joel Gilmore	Outlines the issues associated the Commonwealth Renewable Energy Target (RET), reviewing its effectiveness as an emissions reduction tool and driver of electricity sector abatement and proposes a new approach.
Vulnerable households and fuel poverty: policy targeting efficiency in Australia’s National Electricity Market	Paul Simshauser	Queensland’s longstanding customer hardship policy pre-dates the National Electricity Market and is refined using pre-existing (means-tested) welfare mechanisms to target low income households, while holding the budget constraint constant.
Renewable Energy Zones in Australia’s National Electricity Market	Paul Simshauser	Renewable Energy Zones (REZ) are examined through both i). a consumer-funded regulatory model and ii). a renewable generator-funded market model. A ‘super-sized concessional mezzanine’ facility is presented as a critical element of REZ capital funding as a means to optimise market-based REZ transmission augmentation and moderate sponsor risks of transient underutilisation.

2020 Papers

Title	Author(s)	Description
Is the NEM broken? Policy discontinuity and the 2017-2020 investment megacycle	Paul Simshauser and Joel Gilmore	Analysis of recent NEM performance finds all pressing issues relate to real-time power system security, not Resource Adequacy, and reflect a Rate of Change problem stemming from record levels of simultaneous (asynchronous) new entry.
Merchant utilities and boundaries of the firm: vertical integration in energy-only markets	Paul Simshauser	Questioning the suitability of the energy-only market design, investments in a stand-alone generator, a stand-alone energy retailer and a merged entity are simulated over 16 years of trade under both project finance and corporate financing structures with a focus on credit metrics.
Overcoming the limitations of variable renewable production subsidies as a means of decarbonising electricity markets	Tim Nelson, Alan Rai, Ryan Esplin and Tom Walker	While production subsidies for VRE plant are the most prevalent policy intervention in Australia, two adjustments to production subsidies and their resulting impacts are examined to correct for unintended consequences
Merchant renewables and the valuation of peaking plant in energy-only markets	Paul Simshauser	With merchant renewables a new asset class, a merchant gas turbine, merchant wind, and an integrated portfolio comprising both plants are valued in Australia’s National Electricity Market South Australian region.

2019 Papers

Title	Author(s)	Description
Australia’s National Electricity Market after twenty years	Alan Rai and Tim Nelson	The deficiencies in cost recovery mechanisms and doubling in price increases have disproportionately affected low-income customers. To rectify this, the paper proposes three key reforms: integrating emissions reduction and energy policies; measures to boost network capacity utilisation; and improvements to cost recovery mechanisms.
Trials and tribulations of market responses to climate change: Insight through the transformation of the Australian electricity market	Tim Nelson & Tracey Dodd	The transition to renewables is shown to be impeded by regulators and institutional decisions using the closure of an aging coal-fired power station as an example.
Lessons from Australia’s National Electricity Market 1998-2018: strengths and weaknesses of the reform experience	Paul Simshauser	Australia’s National Electricity Market (NEM) commenced in 1998 as an energy-only wholesale market and accompanying forward markets without policies relating to climate change, natural gas and plant exits. Piecemeal interventions and network policy failures in the mid-2000s with regulatory and business inertia meant network tariffs didn’t stabilise until 2015, resulting in rising prices conflated with price discrimination.
The impacts of regulated pricing on price dispersion in Australia’s retail electricity markets	Ryan Esplin, Ben Davis, Alan Rai & Tim Nelson	Modelling demonstrates that a price cap leads to the withdrawal of the lowest priced offers from the market, in effect reducing the benefits available to customers that ‘shop around’ and are best addressed through non-price regulation policy options.
On the impact of government-initiated CfD’s in Australia’s National Electricity Market	Paul Simshauser	Using the NEM’s South Australia region it is found government-initiated CfDs have a targeted role to play in energy markets by correcting market failure; but broad-based market mechanisms are preferred.

2018 Papers

Title	Author(s)	Description
On entry cost dynamics in Australia’s National Electricity Market	Paul Simshauser and Joel Gilmore	In theory, well designed electricity markets should deliver an efficient mix of technologies at least-cost. But energy market theories and energy market modelling are based upon equilibrium analysis and in practice electricity markets can be off-equilibrium for extended periods. Near-term spot and forward contract prices can and do fall well below, or substantially exceed, relevant entry cost benchmarks and associated long run equilibrium prices.
Regulated electricity networks, investment mistakes in retrospect and stranded assets under uncertainty	Paul Simshauser and Alexandr Akimov	From 2004 to 2018 the Regulatory Asset Base (RAB) of electricity networks across Australia’s National Electricity Market tripled in value, from $32 billion to $93 billion. The run-up in the capital stock was driven by forecast demand growth and a tightening of reliability standards. But demand contracted from 2010-2015. With a rising RAB, contracting demand and a regulated revenue constraint, an adverse cycle of sharply rising tariffs and falling demand appeared to be emerging.
Price discrimination and the modes of failure in deregulated retail electricity markets	Paul Simshauser	In Australia, as with Great Britain, governments have shown rising concern with the health of competitive residential electricity markets. A core concern is the practice of price discrimination and the rising dispersion of prices. The State of Queensland deregulated its residential electricity market in 2016 when almost simultaneously, the two jurisdictions that pioneered this reform, Great Britain and Victoria, were questioning their prior policy decision.
Decarbonisation and wholesale electricity market design	Tim Nelson, Fiona Orton and Tony Chappel	In recent decades, many power systems have introduced electricity generator competition. Market designs have varied with some countries adopting ‘energy-only’ markets and others utilising capacity remuneration mechanisms. With increasing deployment of cost competitive renewable energy and the introduction of policy measures to reduce greenhouse gas emissions, concerns are emerging about the sustainability of these market designs.
East-coast Australian gas markets – overcoming the lumpiness of capital allocation and temporal instability	Tim Nelson	Australia’s east-coast gas market has undergone significant transformation in the past decade. The discovery of non-conventional coal-seam gas reserves led to investment in three ‘lumpy’ LNG export facilities in Gladstone, Queensland. Drilling activity has subsequently slowed, a direct result of an unexpected ‘soft’ global price for LNG. This slowdown, in an environment of a tripling of east-coast gas demand, has resulted in concerns about domestic gas shortages.
Price dispersion in Australian retail electricity markets	Tim Nelson, Eleanor McCracken-Hewson, Patrick Whish-Wilson and Stephanie Bashir	Climate change policy and new home energy generation and management technologies will create further price dispersion in Australian electricity markets due to even greater product heterogeneity. Hence policy makers will need to facilitate, rather than prevent, both price and tariff structure dispersion to improve consumer outcomes.
The future of electricity generation in Australia – a case study of New South Wales	Tim Nelson	The Australian electricity industry has found itself the subject of an intense political debate. At the centre is the role of coal-fired generation. Wholesale electricity prices have risen substantially as a result of a ‘disorderly’ closure of ageing coal-fired power stations. The most economic form of new generation technology in Australia is wind on a levelised cost of energy (LCOE) basis. However, new wind generation must be ‘firmed’ to address variability in output.

2017 Papers

Title	Author(s)	Description
Climate change policy discontinuity and its effects on Australia’s National Electricity Market	Paul Simshauser and Anne Tiernan	Australia’s National Electricity Market (NEM) became unstable in 2016/17 after 20 years of consistent performance. The South Australian grid collapsed on 28 September 2016 – Australia’s first black system event since 1964. Wholesale prices in the region trebled to $120+/MWh; soon after Hazelwood power station announced its exit with just 5 months’ notice.
Garbage can theory and Australia’s National Electricity Market: decarbonisation in a hostile policy environment	Paul Simshauser	In 2016/7 what the NEM experienced is consistent with garbage can theory. Resolution of the supply-side crisis requires a climate change policy that works with, not against, the NEM’s world-class institutional design, to coordinate the exit and entry of energy sources.
On intermittent renewable generation & the stability of Australia’s National Electricity Market	Paul Simshauser	Energy-only markets have an inherently unstable equilibrium because participants are unable to optimise VoLL events. In this article, optimal VoLL events in an islanded NEM region is modelled with Variable Renewable Energy up to 35% market share.
Monopoly regulation, discontinuity & stranded assets	Paul Simshauser	What if trend-load growth of a monopoly utility enters a state of terminal decline from disruptive competition and approaches the limits of the regulatory design envelope and produce the conditions necessary for a utility Death Spiral, and stranded assets?
The changing nature of the Australian electricity industry	Tim Nelson, Stephanie Bashir, Eleanor McCracken-Hewson and Michael Pierce	The electricity supply industry has historically offered a homogenous good supplied via economically regulated transmission and distribution networks.Competition was introduced into the contestable generation and retail supply chain components as part of the 1990s Hilmerreform process.

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