Whole Energy Market Strategy (WEMS)

Structuring of the energy market across vectors, value chains and market participants

• Strategic energy planning - Level of government intervention in planning of infrastructure, further specified through the existence of regional & national, capacity or production targets, carbon targets, & centrally administered property right allocation
• Level of competition in regulated activity - Regulated level of competition & unbundling for activities such as transmission, distribution, interconnections, terminals, permanent storage (sequestration), system operations
• Governance & industry codes - Decision makers involved in the energy sector & their respective powers, and code governance of the different vectors
• Energy security standards - Mandatory security standard metrics for network resilience and energy adequacy, and their statistical approach
• Regulation of Retail market - Specific retail market interventions, including elements such as price caps, mandated or incentivised usage-based and/or time-of use pricing, and mechanisms for guaranteed supply continuity under retailer failure

Market interventions employed to achieve specific policy objectives

• Supply - Mechanisms to incentivise supply side investments
• Demand - Mechanisms to incentivise demand side investments
• FOAK - Mechanisms to incentivise investments in First-Of-A-Kind technologies
• Mature - Mechanisms to incentivise investment in established and widely adopted technologies
• Production - Mechanisms incentivising or disincentivising investment with production as the key policy objective, via support mechanisms or windfall taxes
• Consumption - Mechanisms incentivising investment with consumption as the key policy objective, through support mechanisms for consumption
• Decarbonisation - Mechanisms incentivising investment with decarbonisation as the key policy objective, either through support mechanisms or emission penalties.
• Energy Adequacy & Flexibility - Mechanisms incentivising investment with energy adequacy and/or flexibility as the key policy objective, through support mechanisms

Market design elements that enable the stable and reliable day-to-day operations of vectors

• Wholesale market - Operational market design related to facilitating the matching of supply and demand in a wholesale market
• Balancing & settlement - Processes and mechanisms to ensure operability of the system and manage and reconciling discrepancies between supply and demand.
• Locational granularity - Level of geographical disaggregation of market into zones or nodes
• Temporal granularity - Settlement period over which market participants energy imbalances are settled, which dictates the minimum period for commodity energy trading in the wholesale markets.
• Commodity homogeneity - Level of homogeneity of the commodity, in which the vector can be bought, sold, and traded without concern for production source or other differentiating factors
• Dispatch - Responsibility, mechanism and timing for decision-making on unit scheduling and output levels, prior to redispatch to meet physical system needs.
• Energy Balancing – Normal - Routine processes and mechanisms to ensure balance of supply and demand under typical operating conditions, further specified through the primary balancer, residual balancer, dispatch mechanism, gate closure time where applicable and presence or otherwise of wholesale market interactions to coordinate energy balancing with market operations 
• Contractual and information imbalance settlement - Processes and mechanisms used to address imbalances, i.e, discrepancies between contracted or scheduled generation/ consumption of the vector commodity and the actual real-time values. 
• System Balancing - Mechanisms and contractual arrangements employed by system operator to facilitate real-time system operation, including sub-settlement period energy balancing (to resolve short-term discrepancies between supply and demand), and ancillary services to maintain system stability and security
• Energy Balancing - emergency - Procedures and mechanisms implemented to address severe imbalances between supply and demand that threaten stability and reliability of energy system, further specified through the central balancing function, wholesale market closure, balancing notice and load shedding merit order

Allocation mechanisms of various costs

• Policy costs - Costs incurred from providing policy support to achieve specific government objectives, generally for investments
• Transmission network costs - Costs incurred to remunerate network transmission companies to account for investment, operational & maintenance costs for transportation of energy commodity over long distances
• Balancing costs - Costs incurred by the system operator to ensure real-time balance between supply and demand, including the procurement and deployment of balancing services
• Distribution network costs - Costs incurred to remunerate network distribution companies to account for investment, operational & maintenance costs for delivery of energy commodity to end-users
• Allocation across taxpayers and market participants - Method of distributing costs of energy infrastructure, operations, and policies between general taxation and charges (energy bills) on energy consumers 
• Payment responsibility (charging base) - Allocation of costs across market participants, including distribution between supply (producers) and demand (consumers), and any exemptions or discounts for specific groups/technologies
• Charging metric (charging basis) - Metric used to charge market participants for network or policy costs, generally either on an energy or capacity basis, including those designed to allocate costs to usage or capacity at specific times of the day or year.
• Inter-temporal cost allocation - Deliberate allocation of costs outside the period over which the benefit is realized, either through accelerating or deferring cost allocation to current users