On 15 July 2021, the Commission published a final determination and a final rule to introduce two new market ancillary services to help control system frequency and keep the future electricity system secure. The new services will foster innovation in faster responding technologies and deliver lower costs for consumers.

Stable frequency is an important part of maintaining a secure power system. Frequency varies whenever electricity supply does not exactly match consumer demand and uncontrolled changes in frequency can cause blackouts.

The new markets for Fast frequency response (FFR) will operate similar to the existing market arrangements for Frequency control ancillary services.

The introduction of FFR services, which operate more rapidly than the existing frequency control services, will provide an additional frequency control option thereby reducing the overall costs of managing power system frequency relative to the status quo or other alternative arrangements. 

Further information and background on FFR is available here.

Final determination

The Commission’s final rule is a more preferable rule that is consistent with the solution proposed by Infigen Energy in its rule change request. 

Consistent with the draft rule, the final rule introduces two new market ancillary service categories into the NER for:

• the very fast raise service
• the very fast lower service

The market arrangements for the new market ancillary services will be the same as those for the existing fast raise and fast lower services. This includes the arrangements for registration, scheduling, dispatch, pricing, settlement, and cost allocation. 

Following stakeholder feedback, the implementation time-frames were amended to include:

• That AEMO revise the market ancillary services specification (MASS) within 18 months of the date that the rule is made, to specify the detailed description and performance parameters for the very fast raise service and the very fast lower service.
• That the FFR market ancillary service arrangements commence 2 years and 3 months from the date that the rule is made.

To provide greater transparency on how these services are used, AEMO’s quarterly reporting on frequency reporting has been amended. AEMO will be required to report on the basis on which it determined the quantity and type of any market ancillary service or combination of market ancillary services procured over the quarter. This includes, to the extent that is relevant, the relationship between the volume of the market ancillary services procured and the level of inertia in the power system.

Draft determination

The Commission’s draft rule was consistent with the rule proposed by Infigen in its rule change request. The draft rule introduced two new market ancillary service categories into the NER for:

• the very fast raise service
• the very fast lower service

The market arrangements for the new market ancillary services would be the same as those for the existing fast raise and fast lower services. This included the arrangements for registration, scheduling, dispatch, pricing, settlement, and cost allocation.

The implementation and transitional arrangements under the draft rule include:

• That AEMO revise the market ancillary services specification (MASS) within 18 months of the date that the rule is made, to specify the detailed description and performance parameters for the very fast raise service and the very fast lower service.
• That the FFR market ancillary service arrangements commence 3 years from the date that the rule is made.

The Commission noted these time-frames may be bought forward as a result of further planning associated with the ESB post-2025 work program and stakeholder feedback on the FFR draft rule.

Submissions to the consultation paper closed on 3 June 2021. The Commission received 35 submissions as part of this stage of consultation.

Directions paper

On 17 December 2020, the Commission published a directions paper for two rule change requests that relate to the arrangements for fast frequency response and primary frequency response in the NEM.

Further information on the Primary frequency response incentive arrangements rule change is available at the project page. 

Submissions to the Directions paper closed on 4 February 2021. The Commission received 29 submissions through this stage of consultation.

The directions paper noted that as the power system transitions to a lower emissions' generation mix, there are emerging challenges for power system operation. One element of this technological change is the projected decrease in power system inertia. 

The projected decline in system inertia may lead to significant cost increases for ancillary services used to control system frequency. The provision of faster frequency response services is expected to mitigate the size of future cost increases for market ancillary services compared to a ‘do nothing’ approach. 

The high-level market options for the provision of contingency FFR services are: 

• Option 1 – new market ancillary services to procure FFR FCAS
• Option 2 – reconfiguration of the FCAS arrangements to procure FFR through the existing service classifications.

The Commission sought stakeholder views on these high-level FFR options along with a number of other policy considerations discussed in the directions paper.

Initiation

On 2 July 2020, the Commission published a consultation paper to commence the rule making process and consultation for this rule change request, Fast frequency response market ancillary service. The consultation paper also covered six other rule change requests that relate to the provision of system security services in the NEM.

Submissions to the consultation paper closed on 13 August 2020. The Commission received 43 submissions as part of this stage of consultation.

Extension of time

On 24 September 2020, the Commission extended the timeframe to make a draft determination until 22 April 2021. The extended timeframe was needed so AEMO could develop supporting technical advice through its frequency work plan in stage 2 of its Renewable Integration Study. AEMO’s advice, published with the draft determination, informed the Commission’s draft and final decisions and design choices in relation to fast frequency response services or markets.

Other relevant system services rule change processes underway 

This was one of seven rule change requests relating to the provision of system services that the AEMC assessed in parallel. Collectively, the AEMC refers to these rule requests as the “system services” rule change requests.  

These system services rule change requests complement and are interdependent with the work of the Energy Security Board (ESB) which developed advice on a long-term, fit-for-purpose market framework to support reliability that could apply from the mid-2020's. The AEMC is working closely with the ESB and the other market bodies as it progresses these rule change requests.  

We considered the interactions between issues raised in the different rule changes so that any new frameworks developed in response to these rule change requests could be focused on delivering the most efficient outcomes for consumers.   

The AEMC has made draft and final determinations for some of the rule change requests, with draft and final determinations for others due over the coming year. We prioritised more urgent system security issues while continuing to coordinate with ESB work and seek key technical input from the Australian Energy Market Operator (AEMO).  

More information on each of the system services rule changes can be found at the links below: 

• Fast frequency response market ancillary service (Infigen Energy)  
• Primary frequency response incentive arrangements (AEMO)  
• Operating reserve market (Infigen Energy) 
• Capacity commitment mechanism for system security and reliability services (Delta Electricity) 
• Introduction of ramping services (Delta Electricity)  
• Efficient management of system strength on the power system (TransGrid) 
• Synchronous services markets (Hydro Tasmania)