Rule Change: Open
On 2 July 2020 the Australian Energy Market Commission (AEMC) initiated a rule change request from Iberdrola Australia Limited seeking to introduce an operating reserve market in the national electricity market (NEM) to help respond to unexpected changes in supply and demand.
The directions paper proposes to pursue incremental improvements alongside the initiatives AEMO is already progressing
Participants in the market make their own commitments to keep capacity in reserve, based on price signals and the risks and operational costs associated with running their plant. To date, the market arrangements in place price the need for energy and frequency control, but do not explicitly price reserves.
An alternative approach to meeting reserve needs is to explicitly value their provision through an operating reserve market. This would separate the provision of reserves from energy and frequency control ancillary services (FCAS) markets.
The AEMC has considered the merits of this approach and is proposing not to recommend the implementation of an operating reserve market.
While such a market could provide greater visibility on reserve levels, the Commission considers that the current arrangements are the best mechanism to meet reserve needs now and into the future. An operating reserve market would also introduce additional costs to market customers.
This view was generally (though not universally) supported by stakeholders consulted as part of the AEMC’s consideration of these rule change requests.
The Commission is instead seeking stakeholder input on whether there is merit in pursuing two additional incremental improvements, alongside initiatives that AEMO is already progressing. These are:
- develop and publish more information to the market
- procurement of FCAS at a regional level.
These provide the opportunity to observe the future fleet’s response to changes in market signals, before introducing any complex changes.
New project name
Following the Commission’s proposal in the directions paper not to implement an Operating reserve market and stakeholder feedback to the directions paper, the Commission has renamed this project from ‘Operating reserve market’ to ‘Enhancing reserve information’. This better encapsulates the direction of the rule change as outlined in the directions paper.
Rule change requests
On 19 March 2020, the AEMC received a rule change request from Iberdrola Australia Limited which seeks to amend the National Electricity Rules to introduce a dynamic operating reserve market to operate alongside the existing NEM spot and frequency control ancillary services (FCAS) markets.
On 4 June 2020, the AEMC received a rule change request from Delta Electricity which seeks to amend the National Electricity Rules to introduce 30-minute raise and lower ramping services using the existing FCAS market design framework.
The Iberdrola Australia and Delta Electricity rule change requests were consolidated on 5 October 2023, pursuant to section 93 of the NEL, under the name “Enhancing reserve information” and using project code ERC0295. The AEMC decided to consolidate the rule change requests because both requests relate to considering arrangements for forecast uncertainty and variability given the expansion of variable renewable energy. The consolidation will also simplify the engagement process for stakeholders.
The timeframe for a draft determination has been extended
On 5 October 2023, the AEMC extended the date for publication of a draft determination until 14 December 2023 under s107 of the NEL. The extension allows time for the Commission to further investigate stakeholder feedback raised in submissions to the directions paper.
Key dates for this rule change
- Rule change request received (ERC0295) – 19 March 2020
- Rule change request received (ERC0307) – 4 June 2020
- Initiation of Delta Electricity and Iberdrola Australia Limited rule changes – consultation paper published (for six system service rule changes) – 2 July 2020
- Submissions to the consultation paper closed – 13 August 2020
- Directions paper published for two rule change requests – 5 January 2021
- Submissions to the directions paper closed – 11 February 2021
- AEMO technical advice received – 11 November 2022
- Second directions paper published – 3 August 2023
- Draft determination expected publication – 14 December 2023
- First s107 notice to extend draft determination – 24 June 2021
- Second s107 notice to extend draft determination – 9 December 2021
- Third s107 granted to extend draft determination – 26 June 2023
- Fourth s107 granted to extend draft determination – 5 October 2023