The Australian Energy Market Commission (AEMC) today released the interim report from its review of power system security in the national electricity market.

The AEMC review is focused on developing new frameworks to facilitate the power system’s transition away from conventional generators powered by coal and gas, towards new technologies such as wind farms and solar panels.

Releasing the interim report today, AEMC Chairman John Pierce said energy markets are not static and there will be different challenges in different places tomorrow.

“What we need are market arrangements that can adjust and adapt to a future that is uncertain.

“Many different technical options are emerging in today’s electricity sector and we want to encourage further innovation – rewarding the best options that may mature over time. We also need market mechanisms that reward the best outcomes while keeping consumer prices as low as possible over the long term,” Mr Pierce said.

“There are challenges ahead in managing system security. And system security is essential in order to allow reliable electricity supplies to be provided to customers.

“The changes that need to be made centre on the physics of energy supply, transmission and meeting demand,” Mr Pierce said.

The power system is secure when technical parameters such as voltage and frequency are maintained within defined limits. To maintain frequency the power system has to instantaneously balance electricity supply against demand.

Large deviations or rapid changes in frequency can cause the disconnection of generation, potentially leading to cascading failures and ultimately a ‘black system’.

Spinning generators, motors and other devices synchronised to the frequency of the electricity system have naturally provided the inertia necessary to allow the system to cope with uncontrolled changes in frequency.

New technologies such as a wind or solar have no or low inertia. Currently they have limited ability to dampen rapid changes in frequency.

“Finding new ways to provide inertia and respond to frequency changes is where work is required and it is well underway,” Mr Piece said.

“The Commission is currently working on five rule change requests which address both immediate concerns in relation to emergency protection particularly relating to South Australia’s current frequency issues; as well as new mechanisms to allow security to be maintained across the entire system.

“This interim report outlines our initial view that required changes will include:

• new measures to enable provision of additional inertia for the system most likely through synchronous machines
• development of fast acting frequency response services, which might be provided via invertor-based generators such as wind turbines, by energy storage devices and by demand-response schemes; bearing in mind these involve new technologies and are as yet largely untested internationally
• consideration of the capability of generators and consumer demand to withstand changes in system frequency.

“This review puts an umbrella over many issues being raised by stakeholders in relation to the power system’s ability to keep the lights on while maintaining its frequency at a constant level,” Mr Pierce said.

“The review will consider both policy mechanisms that are in place now; and analyse how any of the feasible emissions reduction policies may impact the future power system.

Contributing to the Commission’s interconnected reform program

The Commission’s work program is addressing a number of structural changes already underway in the energy market and this review touches on many of them.

System security and the market transformation to a lower emissions electricity sector also depends on the east coast gas reforms. These reforms have been endorsed by the COAG Energy Council and are being implemented.

A more efficient gas market improves the power system’s ability to integrate renewables like wind and solar by providing fast-start backup for intermittent generation. Making it easier to buy and sell gas helps lower supply costs for gas-fired power stations which are now replacing coal generators.

The AEMC’s work on gas market reform is continuing with our review of the Victorian Declared Wholesale Gas Market.
“Our proposed reforms are critical to lowering the prices that Victorian consumers of gas will pay – including gas fired generators – helping Victoria replace brown coal with cleaner fuel sources while avoiding massive price hikes,” Mr Pierce said.

Gas support for power system security also reduces the need for, and cost, of security mechanisms necessary to keep the lights on,” he said.

Next steps

The AEMC is calling for feedback on the System security market frameworks review interim report. Submissions are due on 9 February 2016.

We are working with our stakeholders and the Australian Energy Market Operator (AEMO) to develop a comprehensive set of potential solutions in that take into consideration issues raised by consultation across the system security work program.

The review will draw upon the work undertaken by AEMO as part of its Future power system security program which was initiated in December 2015.