The AEMC today published an interim report for its review into the market and regulatory frameworks that underpin reliability in the national electricity market (NEM). This interim report sets out the Commission's initial views on:

  • the key concepts of dispatchability and flexibility
  • forecasting and information processes needed to identify future gaps in electricity supplies
  • the role of the contract market in supporting reliability by guiding investment and operational decisions.

The review also sets out the Commission’s preliminary analysis of Finkel Panel recommendations on the need for a strategic reserve; the suitability of day-ahead markets; and facilitating demand response in the wholesale market.

A reliable supply of energy means having an adequate amount of capacity (both generation and demand response) to meet consumer needs. This means making appropriate operational decisions in the short term as well as having the right amount of investment over the long term.

Reliability in the NEM is underpinned by a market-based framework, where market signals guide efficient investment, retirement and operational decisions. Market-based solutions incentivise innovation, competition and efficiency, leading to lower costs and prices for consumers. The framework is supplemented by intervention mechanisms that can be used by the Australian Energy Market Operator when necessary, including the Reliability and Emergency Reserve Trader (RERT), a type of strategic reserve.

In the past decade the NEM has experienced high levels of reliability. However, significant changes in the energy sector, leading to a tighter balance of supply and demand at peak times, mean that it is timely to assess the framework that underpins reliability.

A reliable supply of energy to consumers also requires a secure power system – one that is operating within defined technical limits - and reliable networks. This review does not address system security or network reliability as they are addressed through different frameworks. In particular, the Commission is considering system security issues through its System security work program.

Stakeholders are encouraged to provide input on the interim report. Submissions are due by 6 February 2018. Stakeholders are also welcome to meet with the project team (please contact Sarah-Jane Derby on 02 8296 7823 or sarah.derby@aemc.gov.au).

There will be further opportunity to provide input when we publish a directions paper in March 2018.

The final report, including recommended actions, will be published in mid 2018 for consideration by the COAG Energy Council.

Media: Bronwyn Rosser, Communications Specialist, 02 8296 7847 or 0423 280 341

About the AEMC’s reliability work program
 
Reliability of the power system is about having sufficient capacity to produce and transport electricity to meet consumer demand. A reliable system requires an adequate supply of capacity, as well as reliable transmission and distribution networks, and the system being in a secure operating state (‘system security’). 
 
The supply capacity can be provided through generation (e.g. large-scale coal, gas, hydro, storages, solar or wind) or demand response and other demand-side mechanisms (e.g. when customers reduce their electricity consumption in response to high electricity prices).
 
The AEMC’s system reliability program includes:
  • Reliability frameworks review - which is considering the regulatory and market frameworks needed to support a reliable supply of electricity as the power system transforms to include more variable, intermittent generation and demand-side innovation. A final report is due in mid 2018.
  • AEMC's Reliability Panel 2018 review of the reliability standard and market price settings – a set of parameters that bear on price, investment and ultimately reliability in the national electricity market. The final report is due in April 2018.
  • Review into the coordination of generation and transmission investment - which is investigating options to improve the coordination of generation and network investment, including potential renewable energy zones, transmission pricing and access. An options paper is due in early 2018.
  • Today’s new rule to redefine the conditions when AEMO it can declare a lack of reserves (LOR) and signal to the market that electricity reserves are running low.