The energy sector is complex and can be technical and jargon-heavy. We’ve compiled a list of the most commonly used terms to help you better understand the sector.
AEMC / Australian Energy Market Commission
The Australian Energy Market Commission (AEMC) is a statutory body set up by the Council of Australian Governments in 2005. The primary functions are to set the rules for the energy markets and to provide advice to Ministers on the design of energy markets. In making decisions about rules and design they are required to apply the National Energy Objective, being that energy markets provide long term benefits to consumers through the operation of effective and efficient frameworks. It has jurisdiction over both the National Electricity Market (NEM) and - albeit smaller in scope - the gas transmission network in Australia. It is the NEM’s rule-making body.
AEMO / Australian Energy Market Operator
The Australian Energy Market Operator (AEMO) is a body set up in 2009 to centrally manage and operate the wholesale and electricity parts of the National Electricity Market, and is responsible for electricity and gas markets in eastern and southern Australia, as well as national transmission planning for electricity. AEMO superseded and incorporated six other bodies which operated gas and electricity transmission and markets. It is the NEM’s operating body.
AER / Australian Energy Regulator
The Australian Energy Regulator (AER) was set up alongside AEMC in 2005 to enforces the rules established by AEMC – primarily the National Electricity Rules (NER) and the National Energy Retail Rules (NERR). AER’s responsibilities include regulating revenues of transmission and distribution network service providers, monitoring the retail and wholesale markets and compliance, investigating breaches and enforcing penalties, and establishing service standards for networks and guidelines. It is the NEM’s regulatory body.
ARENA / Australian Renewable Energy Agency
The Australian Renewable Energy Agency is a statutory body set up in 2012 to manage the Australian Government’s renewable energy programs. It is responsible for funding renewable energy research and development, demonstration, and commercialisation, as well as building and supporting networks to share knowledge, insights, and data from funded projects.
Baseload is electricity supply that is present all the time, 24 hours a day. This has historically been provided by coal-fired generation. See also: peaking power; intermediate demand.
The capacity of a power generation asset is the sustained, full-load output of that asset. The asset’s capacity factor is expressed as a percentage of its nameplate capacity. See also: capacity factor.
The capacity factor of a power plant is the proportion of energy actually generated compared to the total possible output (the capacity) of the power plant. All generation assets have a capacity factor, which is calculated yearly. Capacity factor is generally always below (and can never exceed) 100%. This is due either to maintenance and fault downtime (or reduced operation) or a lack of available fuel (including wind and solar). See also: capacity; output.
Carbon credits / ACCUs
Carbon credits are permits which are issued in return for provably storing or avoiding one tonne of CO2e. In Australia, they are called Australian Carbon Credit Units (ACCUs) and are issued by the CER through using the Australian National Registry of Emissions Units. These credits can be traded or sold, and give the company which holds them the right to emit one tonne of CO2e. See also: CER.
CEFC / Clean Energy Finance Corporation
The Clean Energy Finance Corporation is an Australian Government-owned green bank set up in 2013 to help facilitate investment into the clean energy sector. Currently, the CEFC is responsible for investing $10 billion in clean energy projects, including renewable energy, energy efficiency, and low-emissions technology developments across Australia.
CER / Clean Energy Regulator
The Clean Energy Regulator is a statutory body set up in 2012 with the responsibility of administering legislation to reduce carbon emissions and increase the use of clean energy.
Carbon dioxide equivalent. CO2e is a measure of the global warming potential of a gas, given in terms of CO2 – in other words, how much global warming a given type and amount of greenhouse gas may cause, using CO2as a reference point. For example, one tonne of methane is equivalent to 25 tonnes of CO2 over a 100-year period. See also: greenhouse gas; tCO2e.
Coal-fired power stations
A coal-fired power station is a thermal power generation asset that converts heat energy into mechanical energy, and then into electricity. Generally, this happens by using the burning of coal to vaporise water into steam in a boiler; the steam expands in a multi-stage steam turbine to convert the thermal energy into rotational mechanical energy; and finally, the mechanical energy turns a generator that converts the mechanical energy to electrical energy. Coal-fired power stations are generally used as baseload power stations.
Controlled and uncontrolled load
Controlled load is electricity supplied to specific appliances – often large, high energy-usage appliances such as hot water systems – which are separately metered. The benefit to controlled loads is that they are subject to a cheaper tariff, saving customers money; the catch is that electricity is supplied to controlled load appliances is for a limited number of hours in the day (generally off-peak hours). The actual function and name of controlled load tariffs is different across the states and territories of Australia. See also: tariff.
DMO / Default market offer
The default market offer, or DMO, commenced on 1 July 2019. It is a regulated price cap introduced by the Federal Government that applies to residential and small business electricity customers in flat rate and controlled load Standing Offers. Retailers comply with the annual price cap if an ‘average customer’ on the relevant standing offer rate would not pay more than the cap if they used a ‘model’ amount of electricity per year. The DMO applies to customers in the New South Wales, South Australia, and Queensland. It does not apply to Victoria, however, as the Victorian Government is implementing a separate regulated price regime (the Victorian Default Offer). For more information, see What is the DMO and what does it mean for you? See also: VDO; controlled load; AER; NEM; VDO; reference price.
DR / demand response
Demand response means that a customer reduces their electricity demand at a particular time, upon request, in return for an incentive. The request to reduce electricity demand usually coincides with peak demand periods, high wholesale prices or an event which can cause (or has caused) stress on the grid. A more in-depth explanation of demand response can be found here. See also: baseload; peaking power; pumped hydro.
Energy efficiency means achieving more while using less energy. Generally, it is any measure taken by an energy consumer to reduce the amount of energy they consume to go about their day – either by actually using less energy, or by using energy more efficiently. This can be as simple as replacing old incandescent light globes with high-efficiency LEDs, to installing smart inverters and rooftop solar.
EV / electric vehicle
Electric vehicle. Any vehicle that uses one or more electric motors to move. The term ‘EV’ is primarily used to refer to all-electric road vehicles which use on-board batteries and are charged from residential or commercial charging stations. However, electric vehicles also encompass hybrid vehicles, which use an internal combustion engine in addition to electric motors. The term is less frequently used to refer to electric bikes, scooters, motorcycles, trains, light rail, boats, and planes.
Feed-in tariffs are rates paid for excess electricity that household solar power systems feed back into the grid. They are generally paid as credits on electricity bills.
Gas-fired power stations
A gas-fired power station is a thermal power generation asset that converts heat energy into mechanical energy, and then into electricity. This is generally achieved in one of three ways:
- Steam cycle (baseload or intermediate load): Utilising the burning of gas to vaporise water into steam in a boiler; the steam expands in a multi-stage steam turbine to convert the thermal energy into rotational mechanical energy; and finally, the mechanical energy turns a generator that converts the mechanical energy to electrical energy.
- Gas turbine (peaking load): Gas is used to fuel a gas turbine that converts the thermal energy from the burn into rotational mechanical energy directly; this mechanical energy is used to turn a generator that converts the mechanical energy to electrical energy.
- Reciprocating engine (peaking load): Gas is used to fuel an internal combustion engine that converts the thermal energy from the burn into rotational mechanical energy directly; this mechanical energy is used to turn a generator that converts the mechanical energy to electrical energy.
Gas-fired power stations are much faster to start up than coal-fired power stations, with a response time measured in minutes (compared to the hours or days of coal stations); as such, they are often used as peaking power stations. See also: coal-fired power stations; thermal energy; peaking power; turbine.
GHG / greenhouse gas
A greenhouse gas is any gas that absorbs and emits radiant energy – in effect, it causes the sun’s heat to become trapped within the Earth’s atmosphere, much like a greenhouse would. The primary greenhouse gasses include carbon dioxide (CO2, the primary metric for greenhouse gas measurement), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6) and more complex groups of chemicals: hydrofluorocarbons (HFCs) and Perfluorocarbons (CFs). See also: CO2e; tCO2e.
GW / gigawatt
One billion watts. A unit used to express energy transfer; at this magnitude it is used to describe the power the capacity of very large power stations or entire power grids. The Snowy Mountains Scheme, for example, generates up to 3.8 GW of electricity. See also: watt.
Hydroelectric power, hydroelectricity, or hydro power, uses the force of moving water to generate usable electricity. Water flow under pressure turns turbines – often contained adjacent to large dams – which drive generators, create electricity. See also: pumped hydro.
An interconnector is the infrastructure that allows transmission of electricity between any two of the five states in the NEM – Queensland, Victoria, NSW (including the ACT), SA, and Tasmania. Currently the NEM uses six interconnectors: Terranora (QLD-NSW), Queensland to New South Wales (QLD-NSW), Victoria to New South Wales (VIC-NSW), Heywood (VIC-SA), Murraylink (VIC-SA), and Basslink (VIC-TAS). Basslink is the second-longest submarine power cable in the world, after NorNed in Europe.
kW / kilowatt
One thousand watts. A unit used to express energy transfer; at this magnitude it is used to express the power required to run electric motors, heaters, appliances, and tools, as well as the capacity of residential rooftop solar panels. The average solar rooftop system is 3 kW. See also: kWh; MW; watt.
kWh / kilowatt hour
Kilowatt hour. A unit used to express energy use. For example, a 40 W light globe running continuously for 25 hours will use 1 kWh of energy (40 x 25 = 1000). Household electricity use is usually measured in kWh; for example, the average Australian home uses about 120kWh of electricity per week. See also: kW.
The Kyoto Protocol is a treaty extending the 1992 United Nations Framework Convention on Climate Change (UNFCCC) committing states to reduce greenhouse gas emissions. The Kyoto Protocol was adopted in 1997 and entered into force in 2005. It comprises two commitment periods: from 2008-2012, and from 2012-2020. Negotiations on what measures will be taken after the conclusion of the second period led to the adoption of the Paris Agreement, which is a similar but separate measure under the UNFCCC. See also: Paris Agreement.
LED / light-emitting diode
A light-emitting diode (LED) is a semiconductor that emits light when a current flows through it. LEDs emit light through a complex physics process called electroluminescence, as opposed to traditional light globes, which emit light through by heating an element until it glows (incandescence). LEDs have a number of advantages over incandescent light sources like traditional light globes, including lower energy consumption, longer life, and smaller size.
LNG / liquefied natural gas
Natural gas – mostly methane, with some ethane – that has been cooled to a liquid state for ease and safety of transport. Natural gas is purified by removing dust, water, heavier hydrocarbons, and other impurities, and then cooled to approximately -162°C, condensing it into a liquid. In this state, it occupies about 1/600th the volume that natural gas in its gaseous state would.
MW / Megawatt
One million watts. A unit used to express energy transfer; at this magnitude it is used to describe the power required to supply large residential or commercial buildings, or the capacity of large power stations. See also: watt.
NEM / National Electricity Market
The National Electricity Market describes the combination of a) the wholesale spot market across Queensland, Victoria, NSW (including the ACT), SA, and Tasmania; and b) the physical transmission and distribution network on which the network operates. The network comprises more than 40,000 km of lines and cables, running from Port Douglas in Far North Queensland through to Tasmania in the south and Port Lincoln in South Australia. It is operated by AEMO, and regulated by AER using the National Electricity Rules (NER).
NER / National Electricity Rules
The National Electricity Rules govern the operation of the National Electricity Market. They are determined and updated regularly by the AEMC, and operate with the force of law in the states the NEM operates in. The NER exist so that the 300 registered market participants – including transmission and distribution service providers, power generators, and market customers – understand their rights and responsibilities. The AER is responsible for regulation in the NEM and enforcing the NER.
The Paris Agreement is an agreement within the UN Framework Convention on Climate Change (UNFCCC), dealing with greenhouse gas emission mitigation, adaptation, and finance. It was signed in 2016; as of March 2019, 195 UNFCCC state parties have signed the agreement, and 185 have become party to it. The Paris Agreement central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. Australia’s current nationally determined contribution under the Paris Agreement is to reduce emissions by 26-28 per cent on 2005 levels. See also: Kyoto Protocol; greenhouse gases.
Peaking power plants, or peaker plants, are generation assets that operate when required, to meet peak demand. Due to the nature of peaking power, these power plants are required to have very fast response times. Gas-fired power stations are often designed as peaker plants, with startup times measured in minutes. Hydro power stations also have fast response times. Peaker plants can be used in combination with utility-scale batteries, which have response times measured in milliseconds; the batteries are used to smooth and stabilise grid changes instantly and give peaker plants time to respond.See also: baseload power; gas-fired power stations; pumped hydro; utility-scale battery.
PV / photovoltaic
Solar / photovoltaic panels are comprised of separate photovoltaic cells. These cells utilise the photovoltaic effect to generate electricity from sunlight . Photovoltaic cells are comprised of semiconducting materials – primarily silicon, which is abundant in the Earth’s crust. See also: solar power; rooftop solar.
Pumped hydro is an efficient non-battery energy storage technique which uses gravity to store electricity. In pumped hydro, excess energy supply is used to pump and store large volumes of water at a geographical high point. When there is a demand for energy at a later point, quantities of the water are released and flow back down to a geographical low point, powering turbines as the water flows through. These turbines generate electricity. See also: peaking power.
The reference price acts as a point of comparison for residential and business customers on a single rate without a controlled load. The reference price is used in energy advertising to allow customers to compare how much an ‘average customer’ would pay under various electricity plans versus the reference price. The DMO and VDO are also used as reference prices: retailers are required to outline the cost comparison of their products against the DMO (in NSW, Queensland, and SA) or the VDO (in Victoria). See also: controlled load; DMO; VDO.
Australia leads the world with small-scale solar installations – residential rooftop solar panels – on a per capita basis. Across the country, more than 20% of households have a rooftop solar system installed. Installation of rooftop solar is continuing at a regular rate as households take advantage of the decreasing installation costs to offset their energy bills. AEMO forecasts that by 2038, the total capacity of PV systems could likely be a quarter of total NEM capacity. See also: solar power; PV; AEMO; NEM.
The SGM is administered by the Clean Energy Regulator (CER), a national independent statutory body. It is designed to impose limits on large greenhouse gas emitting facilities to ensure that net emissions are kept below a determined baseline. The SGM only applies to Scope 1 emissions, which are direct emissions. If a facility is projected to exceed its baseline, a number of management options are available, including purchasing or surrendering carbon credits. If a facility does exceed its baseline, a graduated enforcement scheme can be applied at the CER’s discretion. See also: CER, scope, carbon credits.
Companies must disclose their greenhouse gas emissions. In Australia, this is set out by the CER through the National Greenhouse and Energy Reporting Act 2007 (Cth) and the subsequent NGER Scheme.
Different kinds of greenhouse gas emissions are defined using a three-tiered scope.
- Scope 1 emissions (or direct emissions) are emissions released as a direct result of an activity, such as burning coal to produce energy, fugitive methane emissions from coal mines, or burning diesel to run trucks and plant.
- Scope 2 emissions (or indirect emissions) are emissions released as an indirect result of an activity, such as using electricity generated by another facility to power lights and machinery.
- Scope 3 emissions are indirect emissions that are generated in the wider economy. They come from sources that happen as a result of a company’s facility, but not from sources owned or controlled by that company, such as the transportation of purchased fuels.
Scope 1 and 2 emissions must be reported under the NGER legislation, while Scope 3 are not required to be. See also: CER.
Solar power is the conversion of the Sun’s energy into usable electricity through a variety of techniques – most commonly through the use of photovoltaic cells. Solar panels have advantages as energy sources: once they are installed, they generate no pollution or greenhouse gases, they are scalable to meet needs, and the materials they are constructed from are highly abundant.
Spot market / spot price
The spot market is how electricity generation is traded between electricity generators and electricity customers (such as retailers, which on-sell electricity to consumers). The spot market operates like this:
- AEMO determines how much electricity will be needed on the grid every five minutes.
- Generators bid how much electricity they can supply and the price they want to receive for each five-minute interval.
- AEMO arranges these bids by price, from cheapest to most expensive, in a ‘bid stack’. Generators are “dispatched” up to the level required to match the demand, and any more expensive bids that are unrequired to meet demand are not asked to generate.
- The spot price is the cost of the final (marginal) bid that made up the bid stack to meet demand in each five-minute interval.
- The amount paid to generators (and paid by electricity customers) is the 30-minute average of spot prices – for example, every generator dispatched between 10am and 10:30am receives the average of the six spot prices that occur during that period.
A more in-depth explanation of the spot market can be found here.
The tariff is the rate paid for electricity. See also: feed-in tariff.
TCFD / Task Force on Climate-related Financial Disclosures
The Task Force on Climate-related Financial Disclosures (TFCD) is an international body which develops consistent climate-related financial disclosures for use by companies in providing information to stakeholders. It considers the physical, liability, and transitional risks associated with climate change. The TFCD was set up by the Financial Stability Board (FSB), an international body that monitors the global financial system and makes recommendations about maintaining its stability.
Tonnes of carbon dioxide equivalent (CO2e). A unit expressing the global warming potential of greenhouse gases, using CO2 as a base for comparison. For example, one tonne of methane is 25 tCO2e over a 100-year period. See also: greenhouse gas; CO2e.
Thermal power is the conversion of heat energy into usable electricity, primarily through steam. Water is heated and turns into steam, which powers a turbine and drives a generator. The steam is then recondensed into a liquid. Thermal power is predominantly comprised of fossil fuel generation: burning coal, natural gas, or other carbon-heavy fossil fuels.
A steam turbine is a mechanical system which takes thermal energy from steam and converts it to rotational mechanical energy. The turbine uses the steam from a power station’s boiler to turn a large driveshaft, which then operates an electromagnetic generator, creating electricity for the grid. The inside of a steam turbine is made up of several stages of blades, which take advantage of the expanding steam to convert the thermal energy into rotational energy.
Utility-scale batteries, or grid-scale batteries, are large battery facilities designed to support electrical grids – either the wide area grid (the NEM), or smaller local areas (microgrids). Utility-scale batteries can perform a number of tasks, including:
- Short-term storage of energy for load/generation levelling where variable energy supply sources – especially renewables – are used.
- Fast response to help stabilise grid frequency during periods of imbalance (power supply versus load).
They are designed to react (in milliseconds) to fluctuations in the grid and in peaking demand, reducing strain on infrastructure and allowing peaking power plants to react. See also: NEM; peaking power; pumped hydro.
VDO / Victorian Default Offer
The Victorian Default Offer (VDO) regulates the prices retailers can charge residential and small business customer on Standing Offers. The VDO applied from 1 July 2019; it was set by the Victorian Government based on recommendations from the Essential Services Commission of Victoria (ESC). From January 2020, the ESC will set the VDO on an annual basis. See: What is the VDO and what does it mean for you? See also: DMO; reference price.
VPP / virtual power plant
A virtual power plant is a series of interconnected small batteries, predominantly on residential properties which generate more solar energy than they require. Owners allow their energy retailer to store and discharge excess energy as needed by the grid in these batteries, and they receive a feed-in tariff for energy exported to the grid. AGL's VPP was the first residential battery style project in the world to reach the 1,000-battery milestone.
A unit used to express energy transfer. It is equivalent to one joule per second (technical note: a joule, in turn, is equal to the energy given off as heat when an electrical current of one ampere passes through a resistance of one ohm for one second). At this magnitude it is used to describe the power required to run small electric circuits – most commonly, light globes.
Wind power uses the force of moving air to generate usable electricity. It is very similar to hydro power – but uses wind instead of water. Winds turn large turbines, which in turn drive electrical generators, creating usable electricity.