In July 2016 the Australian Energy Market Commission initiated a power system review to guard against blackouts in the national electricity market. The final report in the System Security Market Frameworks Review was released today with a package of recommendations for both immediate measures to address priority issues and further proposals to continue the AEMC’s ongoing system security work program. Draft rules have been released to address risks to energy security created by the power system’s changing generation technologies as more non-synchronous generators like wind and solar come in; and synchronous generators like coal retire.

The AEMC intends to introduce further near term measures through draft rules on the inertia ancillary services rule change request in November 2017.

Why is this extension needed?

The changing generation mix means the power system has less inertia. Less system inertia means frequency may become volatile. If frequency changes too fast then the system is at high risk of going black.

The draft rule released today for the managing the rate of change of power system frequency rule change request addresses the priority issue relating to frequency management.  In particular, it relates to the provision by transmission network businesses of the minimum level of inertia required to maintain secure operation of the power system. This can be distinguished from additional levels of inertia, or alternative frequency control services, that may increase economic benefits by allowing for greater power transfers on the network.

The ‘rate of change of power system frequency’ draft rule does not provide a mechanism to realise the market benefits that could be obtained through the provision of inertia at levels above the minimum level of inertia required to maintain secure operation of the power system. That mechanism will be considered in the related rule request received from AGL titled ‘inertia ancillary services market’. The AGL request proposes the establishment of an inertia ancillary services market and the AEMC intends to continue its assessment of this rule change request with a view to implementing a mechanism to guide the provision of additional inertia for market benefit.

We will explore the extent to which a market mechanism would complement and build on the certainty created through the transmission network obligation by providing the ability to continuously adjust the level of service provision in real time to maximise efficiency. Ultimately, a combined transmission network obligation and market mechanism would form an enhanced framework which efficiently balances certainty and flexibility for the management of system frequency in the long term interests of consumers.

Media contact: Prudence Anderson 0404821935