The Australian Energy Market Commission (AEMC) has started consultation on proposals for new ways to keep the power system secure and reliable as the generation mix changes.
Today the AEMC published a consultation paper seeking stakeholder feedback on six requests for changes to the National Electricity Rules that propose new ways to deliver essential system services that keep the power system operating within key technical settings.
As the power system transitions to a lower emission generation mix, moving away from a system of large, remote power stations towards smaller, distributed generators, this is impacting on both security and reliability of the system:
- there are concerns that reliability is becoming more challenging to maintain as the supply / demand balance tightens; and
- the technical characteristics that keep the system safe and secure are becoming harder to manage because these services -- once provided as a “by-product” of generating electricity -- are not being provided in the same way or same amount anymore.
We need new ways of delivering theses “system services” to keep the power system within safe limits and to provide a secure and reliable service to consumers.
This is reinforced by the Australian Energy Market Operator’s Renewable Integration Study. The stage 1 report finds that in the next five years the national electricity market (NEM) will continue its significant transformation to world-leading levels of renewable generation, testing the boundaries of system security and current operational experience.
The AEMC has already implemented a range of reforms to meet immediate system security needs over the course of 2018 and 2019. However, in 2019 the AEMC identified system security as one if its top priorities. This was reinforced by the ESB’s Health of the NEM report in February 2020, which noted the issue of most concern to the ESB is security.
Building on the initial reforms we need to rethink the way system services are provided so that they support the evolving power system and are efficient and effective now and into the future.
Stakeholders have also recognised this need and put forward six proposals to deliver services like system strength, inertia (the ability of the system to stabilise frequency), frequency response and operating reserves in new ways.
Stakeholders have proposed a range of new arrangements, leveraging existing and new technologies. Each proposal seeks to deliver better system security and reliability outcomes for consumers as the power system evolves.
The rule change requests are listed below.
- Synchronous services markets (Hydro Tasmania) — a proposal to create a market for synchronous services such as inertia, voltage control and fault level (also known as system strength).
- Operating reserve market (Infigen Energy) — a proposal to introduce a reserve market to operate alongside the existing energy and frequency control markets, to help AEMO manage new and emerging operational challenges.
- Fast frequency response market ancillary service (Infigen Energy) — a proposal to introduce new fast frequency control services to efficiently manage power system risks associated with reduced system inertia.
- Efficient management of system strength on the power system (TransGrid) — a proposal to allow networks to be more proactive in the provision of system strength in the NEM. The request proposes to abolish the “do no harm” obligation and substantially amend the minimum system strength requirements.
- Capacity commitment mechanism for system security and reliability services (Delta Electricity) — a proposal to introduce an ex-ante, day ahead capacity commitment mechanism and payment to provide access to operational reserve and other required system security or reliability services.
- Introduction of ramping services (Delta Electricity) — a proposal to introduce 30-minute raise and lower "ramping" services using the existing framework for frequency control ancillary services (FCAS) market design. These services help maintain the frequency of the NEM.
These system services rule change requests complement and are interdependent with the work of the Energy Security Board (ESB) to develop advice on a long-term, fit-for-purpose market framework to support security and reliability that could apply from the mid-2020's. These rule changes provide us with an opportunity to complement the thinking and assessment done in the ESB work program, as well as technical input from AEMO through its renewable integration study. It allows us to address the issues in a cohesive way, as well as addressing system security issues that are more urgent in nature.
The AEMC is working closely with the ESB and the other market bodies as it progresses these rule change requests, given these rule change requests dovetail with this other work.
The AEMC is mindful of the challenge for stakeholders engaging in the large volume of regulatory reforms under way and is consulting on the rule change requests together, in one single consultation paper to help reduce this overall burden.
Stakeholders are encouraged to consider and comment on the interactions between issues raised in the different rule changes.
Submissions by stakeholders in response to the system services rule changes should be provided to the AEMC by 13 August 2020.
Following receipt of stakeholder submissions, the AEMC will update stakeholders on the next steps for each of the work streams and the related rule change requests, including timing. This will include consideration of how each rule change request can dovetail with other work underway, such as that by the ESB & AEMO.
Media: Kellie Bisset, Media and Content Manager 0438 490 041
About the consultation process
The AEMC has received six rule change requests that propose new ways of providing the system services necessary to support the security and reliability of the power system. The AEMC is already considering a seventh rule change request about incentives for primary frequency control that is also relevant to system services.
Collectively, the AEMC refer to these rule requests as the “system services” rule change requests and has published a single consultation paper seeking stakeholder feedback on the issues raised and the solutions proposed in each one.
The AEMC has used the solutions included in each rule change request to group them into three "work streams" – the dispatch, commitment, and investment workstreams – that will group rule change requests based on the timeframe over which the proposed solution will operate. This will allow common issues to be considered and consultation to be streamlined.
While the rule change requests are grouped this way for initial consideration, any new frameworks developed in response to the rule change requests will be focused on delivering the most efficient outcomes for consumers, having regard to outcomes across all time frames.
The AEMC's Investigation into system strength frameworks in the NEM (System strength investigation) will also be progressed alongside these system service rule change requests. The system strength investigation considers a number of issues which interact with those to be considered in the assessment of these rule change requests.
Linkages between system services rule change requests and the ESB’s post-2025 work program
The ESB has been tasked with developing advice on a long-term, fit-for-purpose market framework to support reliability that could apply from the mid-2020's.The system services rule change requests complement and are interdependent with the work of the ESB in its 2025 project, particularly the following four of the market development initiatives:
- Essential system services
- Ahead markets
- Resource adequacy mechanisms
- Ageing thermal generator strategy
The AEMC is working closely with the ESB and the other market bodies, particular AEMO on these rule change requests, given that these rule changes dovetail with this other work. The rule change requests complement and are interdependent with the work of the ESB in its 2025 project. These rule changes provide us with an opportunity to complement the thinking and assessment done in the ESB work program, as well as technical input from AEMO through its renewable integration study. It allows us to address the issues in a cohesive way, as well as addressing system security issues that are more urgent in nature.