Keep physical and financial flows separate
Networks transport electricity, retailers manage customer supply arrangements and market participants settle financial obligations. A PPA allocates cash flows and attributes; it does not reserve a particular electron path. Ownership, operational control and financial exposure may belong to different parties.
The lesson
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01Map participants by function—not by company name
One organisation can wear several hats
A generation owner may also retail electricity, trade contracts or own a battery. Classify the function in the decision you are analysing, not just the company's name. The asset owner, the market participant, the operator and the customer counterparty need not be the same legal entity.
| Function | What it contributes | What it does not establish |
|---|---|---|
| Generator / storage operator | Operates plant within technical and connection conditions; participates through the applicable market arrangements | Guaranteed availability in every future interval |
| Transmission / distribution network | Network transport, connection conditions and network services | The customer's complete retail energy contract |
| Retailer | Customer supply contract, billing and management of wholesale exposure | A reserved physical route for particular electrons |
| Customer / flexible-load operator | Actual demand, on-site assets and any agreed demand response | An unrestricted right to export or change connection conditions |
| AEMO | System and market operation within its responsibilities | Ownership of every generator or a retail supply contract |
| AEMC / AER / governments | Rule-making / regulation and enforcement / policy, respectively, within applicable functions | One interchangeable authority for all Australian jurisdictions |
Draw three separate maps
- 01
Equipment
Generation → network → customer, with storage and customer generation shown as two-way where applicable.
- 02
Contracts
Customer ↔ retailer, participant ↔ market settlement, counterparties ↔ hedge or PPA. Trace the actual legal parties.
- 03
Decision rights
Who may operate, instruct, approve, monitor or enforce? Use contracts, connection conditions and applicable rules as evidence.
Check your understanding
A retailer sells a renewable plan to a factory. Does the retailer necessarily own the local network or dispatch the contracted solar farm?
Show reasoning
No. Those are separate functions and must be established independently.
Read the supply and generation contracts, identify the network provider and check operational arrangements. A brand name or renewable product label is not an organisational responsibility chart.
02Follow the money without changing the electricity flow
A deliberately simplified retail example
A retailer supplies a customer with 20 MWh in one period at an energy-only price of A$100/MWh. Assume all 20 MWh is bought at a single illustrative spot price of A$120/MWh. A fixed-for-floating swap covers the same 20 MWh at A$80/MWh, with the same price reference and period. This is synthetic: ignore network charges, losses, fees, taxes, credit and operating costs.
Retailer's swap receipt (negative means payment)
Swap cash flow = (spot reference − fixed price) × hedged MWh
Assume the retailer pays fixed and receives floating. Actual settlement depends on the contract, reference price, period and volume; not all retail load is perfectly hedged.
Reconcile the period's energy-only contribution
Customer receipts
20 × A$100 = A$2,000
This is customer energy revenue, not the retailer's profit.
Wholesale purchase
20 × A$120 = A$2,400
The financial swap does not erase the physical purchase or its settlement.
Swap receipt
20 × (A$120 − A$80) = A$800
Receiving the difference offsets the higher spot purchase price in this matched example.
Combine the cash flows
A$2,000 − A$2,400 + A$800 = A$400
Without this hedge, the energy-only contribution would be negative A$400. Neither result includes the excluded costs.
Result: The hedge changes financial exposure, not the electricity's path or the site's technical import limit.
Check your understanding
What if the customer uses 25 MWh but the swap still covers only 20 MWh, with all other prices unchanged?
Show reasoning
The energy-only contribution falls to A$300.
Revenue is A$2,500, spot purchase is A$3,000 and the swap receipt remains A$800. The extra 5 MWh is exposed to A$120/MWh while sold at A$100/MWh: a A$100 reduction in contribution. Volume matching matters.
03Read the factory's evening requirement
Your role: prepare a first-pass supply briefing
A factory manager wants to know whether solar and a battery can keep grid import within 25 MW over the next 90 minutes. You have the three half-hour blocks below. The battery has a 15 MW output limit and 10 MWh of usable AC-delivered energy at the start. Assume steady values within each block, no recharge during the event and no additional losses. All data are synthetic; this is not an electrical operating instruction.
| Time | Duration | Factory demand | Solar output |
|---|---|---|---|
| 17:30–18:00 | 0.5 h | 20 MW | 10 MW |
| 18:00–18:30 | 0.5 h | 30 MW | 5 MW |
| 18:30–19:00 | 0.5 h | 40 MW | 0 MW |
Start with net demand before the battery
Net demand = factory demand − solar output
All quantities are at the same AC site boundary. Do not subtract a second generic loss percentage or assume the solar nameplate equals its interval output.
Check your understanding
Calculate factory energy, solar energy and remaining energy demand across all three blocks.
Show reasoning
45 MWh factory demand, 7.5 MWh solar output and 37.5 MWh remaining demand.
(20 + 30 + 40) × 0.5 = 45 MWh. (10 + 5 + 0) × 0.5 = 7.5 MWh. Net demand is 10, 25 and 40 MW. An average alone would hide the last block's network problem.
04Test the power limit and the energy limit separately
Minimum battery output needed
Battery MW = max(net demand − import limit, 0)
Screening calculation only. Assume the battery is the sole controllable resource and can follow each specified block. Verify both its output-power and usable-energy limits.
Base case: 25 MW grid limit
Find required battery power
max(10 − 25, 0), max(25 − 25, 0), max(40 − 25, 0) = 0, 0, 15 MW
The final block reaches the battery's power limit; the other blocks need no discharge.
Check delivered energy
15 MW × 0.5 h = 7.5 MWh
The initial 10 MWh usable-delivered inventory is sufficient. Do not apply discharge efficiency again to that specification.
Reconcile the complete boundary
Grid 30 + solar 7.5 + battery 7.5 = demand 45 MWh
Grid imports are 10, 25 and 25 MW. The battery retains 2.5 MWh of usable-delivered energy.
Result: This schedule is feasible under the stated power and energy assumptions, but it has no spare battery power in the final block.
Check your understanding
Now reduce the grid import limit to 20 MW. Does the same battery still suffice?
Show reasoning
No: required battery outputs are 0, 5 and 20 MW; energy is 12.5 MWh.
The final block exceeds the 15 MW power limit by 5 MW, and required energy exceeds 10 MWh by 2.5 MWh. Increasing energy capacity alone does not fix the power shortfall.
05Challenge the battery and the gas alternative
A second event exposes the recovery assumption
After the 25 MW base case, 2.5 MWh usable-delivered energy remains. An identical event needs another 7.5 MWh, so the battery must restore 5 MWh of future AC delivery. Assume 80% AC-to-AC round-trip efficiency for replenishment and a 5 MW charge limit for one hour, with connection capacity available for charging.
Work backwards from the next commitment
Required charging energy
5 ÷ 0.80 = 6.25 MWh AC
This replenishes the missing future AC-delivered amount; the model expresses storage inventory on that delivered-energy basis.
Available charging energy
5 MW × 1 h = 5 MWh AC
This adds only 5 × 0.80 = 4 MWh of future delivery.
Residual gap
7.5 − (2.5 + 4) = 1 MWh
The one-hour charging window is insufficient. Extra time, feasible customer response or another resource is required.
Result: The first event passes, but an immediate repeat does not. Timing and recovery belong in the original commitment.
Would a gas engine solve the problem?
As a separate alternative to the battery, suppose a ready gas engine could supply the final 15 MW for 30 minutes. At an assumed net heat rate of 8 GJ/MWh it requires 7.5 × 8 = 60 GJ, or 0.06 TJ. If confirmed fuel deliverability during the event is only 40 GJ, energy production is limited to 5 MWh before considering other constraints. Purchasing 60 GJ on paper does not establish delivery through the pipeline.
Check your understanding
Could a verified 2 MW customer reduction in the final half-hour close the second event's 1 MWh gap?
Show reasoning
Yes, in this simplified case: 2 MW × 0.5 h = 1 MWh.
The battery would deliver 13 MW for half an hour, or 6.5 MWh. That matches its replenished usable energy. Verify the demand-response baseline, actual availability and later rebound before treating the commitment as firm.
06Separate the physical plan from the commercial and regulatory plan
Three questions for the project briefing
- 01
Physical delivery
Can the equipment meet the import cap in every block, including a repeat event and credible outages?
- 02
Commercial exposure
Which meter quantities and prices enter the retail contract, tariff or PPA? Who pays for charging and non-delivery?
- 03
Authority and evidence
Which market and jurisdiction apply? Who confirms the connection conditions, operating permissions and relevant obligations?
| Question | First evidence to seek |
|---|---|
| Is the import limit and site response acceptable? | Network service provider's connection conditions and competent site engineering assessment |
| What will the customer pay? | Retailer or contract counterparty's actual pricing terms and meter boundary |
| How does the NEM operate? | AEMO operational and market documentation |
| Who changes national energy rules? | AEMC rule-change and rule documentation |
| Who regulates and enforces relevant national obligations? | AER guidance, checking the applicable jurisdiction and function |
Do not transfer NEM assumptions unchanged across Australia
The NEM connects eastern and south-eastern Australia. The WEM serves the South West Interconnected System in Western Australia; Western Australia and the Northern Territory are not connected to the NEM. Establish location and applicable arrangements first. This workshop's arithmetic does not itself choose a registration pathway or settle a regulatory obligation.
Check your understanding
A renewable PPA promises enough annual MWh. Does that establish compliance with this factory's 25 MW import limit?
Show reasoning
No. Annual contractual energy does not establish this interval-level physical capability.
You still need the demand and generation profiles, actual connection limit, storage state and operating evidence. Assess the contract separately for its price, delivery and risk allocation.
Watch the explanation
Key terms in plain English
- PPA
- Power purchase agreement: a contract for electricity-related supply or settlement. Volume, price, environmental products and risk allocation depend on the contract.