Understanding of microeconomics
The relevance of microeconomics to the energy sector
The NEM is governed by the National Electricity Rules, which determine the operation of, energy markets. Its decisions and advice are always made with consideration of microeconomic principles.
In order to make arguments for reform, advisors must be able to speak in the language of economics. They must have exceptional understanding of economic theory, such as:
- market design;
- strategic behaviour, and its consequences for mechanism design;
- regulatory economics; and
- competition policy.
These concepts are a form of ‘currency’ in debates that surround the industry. Major decisions that influence the development of the power system always make reference to microeconomic principles.
What skills and knowledge does Endgame possess in microeconomics?
We have extensive experience of the application of microeconomics to the energy sector. Our team members have been involved in major market design initiatives such as:
- the development of a potential ahead market in the NEM for the Energy Security Board in 2020;
- the review of transmission loss factors for the Australian Energy Market Commission in 2019;
- the Australian Energy Market Operator’s 2017 review of intervention pricing;
- the five-minute settlement rule change in 2016; and
- the Distribution Network Pricing rule change in 2014.
We possess the twin capabilities of being able to construct microeconomic arguments, as well as being able to test, validate, and support those arguments by means of rigorous quantitative analysis.