The Australian Energy Market Commission today started consultations on a proposal aimed at improving the way non-energy costs are shared between wholesale customers in the national electricity market (NEM) during periods of low operational demand.
Today’s paper deals with issues raised in a rule change request from Infigen Energy.
The request seeks to amend the formulas used for financial settlement of non-energy costs to address issues that could arise when net demand is low.
When demand falls too low, this could prevent the Australian Energy Market Operator’s (AEMO) systems for financial settlement in the NEM from functioning.
As well, this has the potential to cause distortions in the way non-energy costs are distributed between market customers (who are usually retailers or major industrial users). Some market customers could over-pay – which raises inequity concerns and could cascade into other problems. And in some cases, market customers could end up being wrongly paid.
Non-energy costs are for crucial services, such as those to maintain stable frequency of the system.
The National Electricity Rules were not designed for a scenario where, because of two-way flows of electricity from customers, there is no energy demand from which to recover non-energy costs from users.
But there are recent forecasts of low operational demand within South Australia because large volumes of electricity are being produced and exported from rooftop solar panels.
Infigen proposes to change the formulas used to calculate these non-energy costs to:
- prevent the issue of the NEM being unable to settle
- improve the allocation of non-energy costs in low operational demand so that the burden is not falling disproportionately on some market customers
- reduce the operational risks to the NEM that could occur under low operational demand.
The Commission has also published a separate consultation paper on a proposed rule change from AEMO, ‘NEM settlement in negative, zero and low operational demand’. That is related to this project and is being considered urgently by the Commission.
The urgent NEM settlement issues are being addressed in the consultation paper on AEMO’s request and the distribution on non-energy costs in the consultation paper on Infigen’s request.
Over the longer term, some of the issues raised by both AEMO and Infigen might be solved by our work on supporting the integration of energy storage systems in the NEM.
The AEMC invites stakeholders to make a submission on the proposed changes with submissions for both papers closing 20 May 2021.
Media: Kellie Bisset, Media and Content Manager, 0438 490 041