Since the commencement of the new Wholesale Electricity Market (WEM) on 1 October 2023, concerns have emerged regarding the accuracy of the Australian Energy Market Operator’s (AEMO’s) operational forecasting and its impact on market outcomes. In response, Energy Policy WA, in collaboration with AEMO, is undertaking a review of AEMO’s operational forecasting processes.
Operational forecasting in the WEM is a ‘centralised’ AEMO process except for utility intermittent generation forecasting, which is partially decentralised. Operational forecasting in the WEM is a two-stage process.
- In the first stage, AEMO produces forecasts of demand for energy and ancillary services and for intermittent generation (which are based on market submissions made by participants).
- In the second stage, these forecasts are used in the dispatch and pre-dispatch processes along with other market data (e.g. participant real-time market submissions) to produce ‘forecasts’ of market outcomes, which AEMO and participants base operating decisions on.
As the WEM transitions toward greater reliance on weather-dependent generation, such as wind and rooftop solar-accurate weather forecasting (including temperature and wind/solar resource availability) is becoming increasingly critical for effective energy dispatch. To support this transition, AEMO must have the capability to adopt best-practice forecasting methods that reflect the evolving generation mix.
Forecasting errors can arise across various components of the forecasting process. For instance, inaccuracies in predicting evening peak demand or wind generation output may materially impact market efficiency. This review will assess the contribution of different forecasting components to observed inefficiencies in the market.
The objective of the review is to identify and recommend near-term improvements to AEMO’s operational forecasting processes. These recommendations will aim to ensure that AEMO’s processes are fit-for-purpose and aligned with best practices in the National Electricity Market (NEM) and internationally.
Operational Forecasting Review Consultation Paper
On 24 July 2025, Energy Policy WA published a Consultation Paper that presents the analysis of AEMO’s operational forecasting processes and proposals to improve these.
The Consultation Paper presents six proposals to improve AEMO’s operational forecasting processes:
- Reconsider blending parameters.
- Increase collaboration with a number of weather data providers.
- Enhance documentation and processes.
- Introduce a centralised forecasting approach for intermittent generation.
- Publish operational forecasting metrics.
- Formalise large load information provisions.
The window for submitting feedback on the Consultation Paper closed at 5:00pm (AWST) 28 August 2025.
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