The Australian Energy Market Commission (AEMC) is proposing a shift for the focus of its ‘Operational Security Mechanism’ (OSM) rule change to identify more immediate solutions that address the need for power system security as it transitions to net zero.

The shift in focus has been outlined in a forward-directions note released today.

In September 2022 the AEMC released a draft determination proposing a new tool to allow the Australian Energy Market Operator (AEMO) to value, procure and schedule security services in the National Electricity Market (NEM), within the operational timeframe.

Following careful consideration of the approach proposed in the draft determination, as well as stakeholder feedback, the AEMC intends to investigate options to streamline and simplify existing security services frameworks.

Investigation will be carried out in relation to system strength, inertia and the Network Support and Control Ancillary Services (NSCAS) frameworks – including how contracts for such ancillary services are scheduled in real-time and improvements to the directions process.

The AEMC is of the view that there may be simpler solutions available than the model proposed in the draft determination and that these could be implemented in a more efficient and timely manner to address challenges with system security as traditional forms of generation (such as coal-fired generation) become less prevalent.

The AEMC also considers that a focus on simplicity and flexibility, rather than introducing complex mechanisms for operational procurement, could result in lower costs for consumers and greater, more immediate, system benefits.

This approach would see a focus on supporting the power system through the transition, recognising that this may be different from what the system needs in the longer-term. 

Key concerns identified in the initial OSM rule change will also be addressed through the approach stepped out in the upcoming AEMC directions paper. These include:

• putting in place frameworks to procure essential system services (ESS) to support the NEM and reduce the need for the Australian Energy Market Operator (AEMO) to use ‘directions’
• supporting new investment in ‘plant’ technologies that provide services. 

The AEMC will continue to work closely with AEMO, the Australian Energy Regulator (AER) and other stakeholders to gain valuable feedback and progress the project.

Given the complex issues raised by this rule change, which have led to the change of direction, the timeframe for a final determination on the rule change has been extended to 21 December 2023.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au. 

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