Today we release the Commission’s draft determination on the emergency reserves framework for public feedback.
The draft determination on the operation of the reliability and emergency reserve trader (RERT) released today clarifies its particular role within the broader range of reliability mechanisms in the national electricity market.
The determination is aimed at making the reliability and emergency reserve trader a more effective emergency instrument to manage the risk of power disruption to households and businesses in circumstances like extreme weather events.
The changes are designed to allow AEMO the flexibility to procure power supplies for use in emergencies at minimum cost to households and large and small businesses.
There has been considerable stakeholder consultation into the draft determination, and after the RERT's use in Melbourne in late January we anticipate further input ahead of the final emergency reserves determination due in May. I invite you to be part of the conversation to finalise this important new rule.
It’s also important to highlight that the reliability and emergency reserve trader is a safety net mechanism and is not a substitute for an integrated energy plan to address market capacity and stability in the national electricity market.
The most urgent response to transition issues in the power system today is the COAG Energy Council’s introduction of the retail reliability obligation (RRO). Energy ministers will be considering the energy security board’s development of this new obligation mid-year. It puts a legally binding obligation on retailers to contract with generators and demand response providers so power supplies are in the right place when needed. Investment signals from clear government policies and financial incentives that directly link to the system’s physical requirements is what drives long-term power system reliability. One of the things really needed at the moment is new investment in capacity the system needs – the sort of capacity that could assist with the transition that’s going on at the moment.
The energy transition is putting more pressure on existing participants in the market that can lead to equipment failures and breakdowns.
Greater incentives are needed in the market to ensure that retailers are giving reliability a priority in their long-term contracts.
Emergency reserves are more expensive, which is why we need to keep them to a minimum. That’s why we also need a well-functioning market with clear price signals and information, backed up by policy certainty from governments, with tools like the retailer reliability obligation. This is a key action governments can take to address the issues currently that concerning consumers in the energy market.
The rotational loadshedding events during January were unquestionably regrettable.
The steps taken by AEMO were done to maintain system balance and prevent uncontrolled blackouts cascading across the system.
Overall, the power system’s reliability standard has been overwhelmingly met. If approved by the COAG Energy Council the retail reliability obligation would help create further incentives to provide for dispatchable capacity that the system needs in order to meet the reliability standard into the future.
In addition to the retailer reliability obligation initiative - making it easier to buy and sell gas in redesigned gas markets will increase competition, lower costs and help support gas-reliant industries, with significant flow-on benefits to both consumers and the general economy.
John Pierce
Chairman