Fundamentals Model

Here we go into details on our NEM Fundamentals Model. We utilise the same overall framework that powers all of Modo Energy's forecasts. For details of this Core Model, click here.

Our NEM forecast is a 5-minute granularity, nodal model that produces outputs to 2054. The forecast models demand, generation, constraints and ultimately prices at a 5-minute settlement period level, which in turn are used as inputs to our battery dispatch model.

The model runs off assumptions of demand, generation capacities, storage capacities, bidding behaviour, transmission capacities, and outages. Our fundamentals model is validated against historical prices to ensure it accurately reflects price-setting behaviour. We specifically focus on modelling volatility as a core part of our model, as those periods are especially important to storage revenues. We do this by modelling at 5-minute granularity and by accounting for all types of bids from generators:

• Bids close to the price floor to force the unit to stay online
• Bids close to the short-run marginal cost of the unit
• Bids close to the price cap in order to maximise unit or portfolio revenue

Nodal network modelling

To reflect the true locational dynamics of the NEM, we model a transmission network of over 200 nodes, spanning the five NEM regions: Queensland, New South Wales, Victoria, South Australia, and Tasmania. Each node represents an individual substation, connected to its neighbours by transmission lines with their own thermal ratings and electrical characteristics. This lets us capture congestion on individual transmission corridors, rather than approximating it at a broader regional level, giving us nodal prices at every point in the network which can be used to constrain batteries in our dispatch model based on their specific connection point.

Find out more about how the network is built, and how nodal prices and losses are calculated, in the Network section.

5-minutely pricing

The model runs at 5-minutely granularity to build a full 5-minute time series of energy and FCAS prices through to the end of the model. Modelling at 5-minute granularity is critical to capturing some of the main drivers of price volatility within the NEM, as well as maximising the value that battery energy storage can capture from this.

What are the core inputs?

The model uses a range of inputs, primarily Modo Energy’s independently developed market outlook. This is informed by other sources, including data from NEMWEB and AEMO’s Integrated System Plan (ISP). We update to use the latest ISP data whenever new draft or final versions become available. This outlook is grounded in rigorous market research and informed by deep industry expertise, providing a nuanced view of the future electricity market and capacity landscape. Find out more information by heading to the sub-page for each section.