Market Review: Completed
Overview
The Commission has completed its investigation into the effectiveness of system strength frameworks in the NEM.
The Commission has proposed several changes to evolve the existing frameworks, to facilitate the power system transition. These changes are intended to proactively deliver the volumes of system strength needed to maintain security, and to facilitate the effective connection and operation of new generation, so that consumers can benefit from cheaper and lower emissions generation.
The Commission has worked closely with the ESB, AEMO, AER, industry and jurisdictions to deliver an evolved framework for system strength. This evolved framework has three main components, reflecting how the supply of, demand for and effective coordination of this critical system service:
- Supply side: We have proposed a coordinated model for the supply of system strength. AEMO will have a key role in proactively considering system strength needs. TNSPs, working with AEMO, will face an obligation to proactively provide the volumes of system strength needed to maintain security, and to facilitate the effective connection and operation of expected volumes of new generation. By drawing on the existing integrated planning frameworks and the established system engineering practice of meeting a defined system standard, this coordinated supply side model is designed to deliver efficient volumes of system strength, while managing costs by utilising the existing NEM economic regulatory frameworks.
- Demand side: We are recommending the introduction of two new technical standards that will apply to all new generators connecting to the power system, such that they use efficient amounts of system strength. This will help to make the best use of this limited, common pool resource, which will in turn help keep costs low for consumers.
- Effective coordination between the supply and demand sides: Finally, we are recommending a mechanism to coordinate the demand and supply side arrangements. This will be achieved through a charge on generators who decide to connect and use the system strength supplied by TNSPs. These generator charges will then be used to reduce the total amount that customers pay through their network charges. This mechanism will share the costs of system strength between customers and generators.
These recommendations are designed to build on and evolve the existing framework, and include the following changes:
- By supporting the proactive provision of system strength at levels needed to support efficient connection of new generation in specific parts of the system, the evolved framework is intended to help speed up the connection process, and help to remove some of the uncertainty faced by new connecting generators. This will benefit consumers by supporting cheaper and lower emissions generation.
- The framework will also more effectively identify and address low levels of system strength as they arise in NEM regions, to help maintain system security at the lowest possible cost. This will benefit consumers by reducing the risk of security related issues, helping to reduce the risk of blackouts.
- It will also allow for the provision of increased levels of system strength to enable greater output from lower cost generation sources, to deliver lower cost electricity for consumers.
ESB’s Post 2025 market design work and next steps
This investigation complements and is consistent with the ESB’s broader system security work program. The ESB’s work program looks to design a robust and resilient power system, for now and the future. System strength is a critical system security service and is pivotal to facilitating the power system transition underway. The recommendations are consistent with the direction set out in the ESB’s September consultation paper.
The Commission will be engaging with the ESB, AEMO, AER and industry to develop these recommendations further through the Efficient management of system strength on the power system rule change process.
Background
In September 2017 the Commission made the Managing power system fault levels final rule that established two system strength frameworks:
- The minimum system strength framework, which obligates TNSPs to procure system strength services needed to provide the levels determined by AEMO if AEMO has declared a shortfall in minimum needed levels of system strength.
- The ‘do no harm’ framework, which requires AEMO to develop system strength impact assessment guidelines that allow TNSPs and generators to assess the impact of a new generator connection on system strength. From this, the new connecting generator is obligated to do no harm to the security of the power system in relation to system strength. As such, if the new connecting generator has a negative impact on the fault level (a measure of the level of system strength in that area) then that generator must remediate that impact.
Discussion paper
The Commission initiated this review with the publication of a discussion paper on 26 March 2020. This paper:
- Sets out the key issues with the current system strength frameworks, including the “do no harm” obligation on connecting generators and the minimum system strength frameworks.
- Explores some of the key concepts and considerations relevant to the provision of system strength, including exploring what system strength is, why it is needed, how it is provided, and the physical attributes of the service.
- Sets out, at a high level, some potential models of how the system strength frameworks might be evolved going forward.