Market Reviews: Open

System Security Market Frameworks Review

Reference:
EPR0053
Reviewed by:
AEMC
Initiated by:
AEMC
Date initiated:
14-Jul-2016
Project Leader:
Sebastien Henry
Overview

The electricity industry in Australia is undergoing a fundamental transformation. The last decade has seen a rapid rise in the penetration of new generation technologies, such as wind farms and rooftop solar. In the past, these technologies accounted for only a small fraction of total electricity supply. Now they are a critical part of our power system, and their significance is continuing to grow.

The electricity industry in Australia is undergoing a fundamental transformation. The last decade has seen a rapid rise in the penetration of new generation technologies, such as wind farms and rooftop solar. In the past, these technologies accounted for only a small fraction of total electricity supply. Now they are a critical part of our power system, and their significance is continuing to grow.

As these technologies make up an increasing proportion of Australia’s electricity needs, new approaches to maintaining power system security will be required. To support the continuing transformation of the National Electricity Market (NEM) the Australian Energy Market Commission (AEMC) is conducting a review into the regulatory frameworks that affect system security in the NEM.

The review deals with a range of complex inter-related issues for which technical solutions have not yet been fully developed, both within the NEM as well as internationally.

New market frameworks need careful design to limit costs over the long term while enabling innovation and sufficient investment for new service provision to be effective in maintaining security as the market transitions.

The AEMC intends to publish a directions paper in mid-March. The paper will provide an update on the system security work program and set out the Commission’s proposed approach to addressing the issues raised in the review.

The review also encompasses and progresses three rule change requests that relate to system security. The South Australian Minister for Mineral Resources and Energy and AGL have both submitted rule change requests proposing the introduction of new mechanisms to procure additional system security services to support power system frequency. The South Australian Minister for Mineral Resources and Energy has also submitted a rule change request to address the reductions in system strength.

Due to the complexity of the issues raised, the period of time for making draft determinations on the three related rule change requests has been extended until 29 June 2017.
 

Background

The AEMC self-initiated the System Security Market Frameworks Review in July 2016 under section 45 of the National Electricity Law and published a terms of reference. The review is being coordinated with ongoing technical work on these and related issues being undertaken by the Australian Energy Market Operator. The terms of an agreement have been set out on how the AEMC and AEMO will collaborate, seeking to ensure that these activities deliver a coordinated package of measures to maintain future power system security.

The AEMC will consider the rule change requests as well as undertake the Review. The output of the Review will be a report to the COAG Energy Council highlighting rule changes and technical changes made in response to the rule change requests received, and recommendations for further action where required, including possible changes to policy or legislative frameworks or recommendations in relation to potential future rule change requests.

In December 2016, the AEMC published an interim report on the System Security Market Frameworks Review. The report sets out some of the key aspects of system security being considered and some of the preliminary findings of the Commission.

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Documentation