Nexa Advisory’s Submission: Capacity Mechanism High Level Design paper

Nexa Advisory has recently released a response to the Energy Security Board’s (ESB) Capacity Mechanism High-Level Design paper. The response highlights the necessity of an orderly transition from high carbon to low carbon generation in Australia for meeting climate targets, reducing cost-of-living pressures, and ensuring a secure energy market.

While Nexa supports the concept of a capacity mechanism, there are significant concerns about the ESB’s proposed design, which is seen as an extension of the Physical Retailer Reliability Obligation (PRRO). Nexa argues that this design could introduce new uncertainty and costs, undermining investment in essential energy storage to complement renewable generation.

Nexa urges for a decoupling of the mechanisms driving investment in renewables and storage from those managing the phase-out of coal generation, proposing a focus on enhancing electricity storage to meet the target of 15 GW by 2030 and ensure renewable generation is dispatchable.

The suggested approach provides clarity and flexibility for managing capacity and reliability, while minimizing unnecessary costs for consumers. In the response, Nexa outlines its proposed structure for a capacity mechanism and their reservations about the ESB’s design, including the reasoning behind their advocacy for a separate process to manage the transition from coal.