On 29 February 2024the Australian Energy Market Commission (AEMC) published a final determination and final rule to change the way the system strength quantity (SSQ) component of the system strength charge is calculated. The final rule aligns the two options – self remediation or paying a charge – so the assessment of system strength impact under both is broadly equivalent.

Background 

The system strength framework in the National Electricity Rules (NER or rules) requires a new or altered connection (typically a generator or large load) to mitigate its system strength impact:

• through self-remediation, for example, by installing a synchronous condenser or grid forming battery, or
• by paying a system strength charge to a system strength service provider (SSSP) - typically, the local transmission network service provider (TNSP).

The choice is designed to encourage connection applicants to make efficient decisions when it comes to investing in system strength.

But to make efficient decisions about whether to remediate or pay the charge, connection applicants need the options to be broadly equivalent.

The final rule makes the two options to address system strength impact broadly equivalent

The final rule makes the two options – remediate or pay a charge broadly equivalent as originally intended. This will enable the benefits and efficiencies of the system strength framework to be realised.

Specifically, the final rule: 

• removes the SSQ calculation from the NER and replaces it with a requirement for AEMO to determine a methodology for calculating SSQ, as part of the system strength impact assessment guidelines (SSIAG)
• includes new policy principles in the NER to guide AEMO’s development of the SSQ methodology and provide a level of certainty for stakeholders about what the SSQ should represent
• clarifies the process of moving from an indicative to a final SSQ, noting that the final SSQ remains in place unless the connected plant is altered. 
• includes transitional arrangements so that the new arrangements would be available for connection applicants mid-way through a process and for those who have already elected to pay the charge.

The final rule triggers an update to AEMO’s SSIAG in consultation with stakeholders. AEMO’s intention is to propose for consultation the use of a minimum stability coefficient of 1.2 in the SSQ so it can be broadly comparable to the calculation of the system strength impact used for self-remediation.

Based on stakeholder feedback, the final rule also makes minor amendments to improve clarity and understanding of how the system strength framework works.

The final rule will lead to lower cost provision of system strength as the power system transitions

As the electricity sector decarbonises, significant investment in new generation is required. A substantial volume of this generation is forecast to be lower-cost, inverter-connected generation such as batteries, wind and solar. Connection of this generation will necessitate investment in system strength to ensure the secure operation of the power system.

Efficient decisions by connection applicants about whether to invest capital to self-remediate their plant’s general system strength impact; or pay the system strength charge for centrally provided system strength services, will lead to lower-cost provision of system strength across the power system and better outcomes for electricity consumers as the power system transitions.

The final rule was informed by stakeholder feedback

The final rule was made in response to a rule change request submitted by the Australian Energy Market Operator (AEMO).  

The AEMC commenced the rule change process on 9 November 2023 and progressed it under a fast track process as AEMO had already consulted on the nature and content of its proposal while developing its SSIAG.

The fast track rule making process allowed the AEMC to proceed directly to publishing a draft determination and draft rule on 30 November 2023. We received 10 submissions.

Submissions were broadly supportive of the approach taken in the draft determination and draft rule. Some minor changes were made to the final rule in response to some stakeholder comments to improve clarity and understanding.