The Australian Energy Market Commission has acted urgently to avoid significant disruption to the Australian Energy Market Operator’s payments and prudential systems when the demand for grid-sourced electricity is low.

A final determination and rule released today provides a practical, targeted and temporary solution to the imminent risks to financial settlement on the national electricity market.    

The Australian Energy Market Operator (AEMO), which requested the rule change, has advised that net regional demand in South Australia could be zero or negative by spring 2021.

This happens when more electricity is being produced by rooftop solar panels or other distributed energy resources than retailers and major industrial users are consuming from generators via the grid. 

In South Australia, peak rooftop solar capacity has grown from 648 MW in December 2017 to 1152 MW in December 2020. 

Today’s decision will enable payments for trade on the NEM to be settled by AEMO even during conditions of low, zero or negative regional demand. 

At the moment, when regional demand falls below a certain low threshold, AEMO’s settlement systems are unable to calculate non-energy costs such as payments for services to restart the system after major blackouts. 

This is because the energy rules and AEMO’s settlement systems were designed when the grid was dominated by one-way electricity flows from large-scale generators to customers – so there was always sufficient demand to recoup non-energy costs. 
As AEMO’s settlement systems are integrated, if it cannot settle non-energy costs, this then trickles through to the settlement of all trades, including energy – leading to market disruption.  

Today’s rule addresses the situation by allowing AEMO to use substitute values in its non-energy cost allocation equations when demand is below 150 megawatt-hours during a trading interval. 

AEMC Chair Anna Collyer said that other Commission projects underway were crucial to a long-term approach to resolve these issues. 

“Our work on integrating energy storage systems will be part of a longer term and comprehensive solution,” Ms Collyer said.

“That work is looking at how to adapt the regulatory framework for a world where two-way flows of electricity will be commonplace and distributed energy resources are fully integrated. 

“Also part of the solution is the roll-out of global settlement, which takes effect in May 2022. This will overhaul AEMO’s settlement process for retailers and will ensure that extra energy metering data is available. 

“Taken together, these projects will be a game-changer that will give the market new ways of measuring and charging for power flows.”

Because it is making this rule change, the AEMC has released a draft determination to not make a rule for the related rule change Settlement under low operational demand, submitted by Infigen Energy.

That rule change related to the potential for distortions in the way that non-energy costs are allocated between market customers. Today’s rule change addresses that issue by reducing the risks of an inequitable situation where some market customers could over-pay and some could end up being wrongly paid.  The rule uses a demand threshold of less than 150 MWh in a trading interval as this addresses the issues raised by both Infigen and AEMO.

The rule will come into effect on 1 September 2021.

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