Rule Change: Open
The Australian Energy Market Commission (AEMC) is considering options to improve current market arrangements for the provision of security services to ensure the power system remains secure in response to rule change requests from Hydro Tasmania and Delta Electricity.
Essential system services (ESS) are critical to maintaining overall power system security by meeting core power system requirements.
Given the current transition to a new operating environment with exiting synchronous generation and increasing penetration of inverter-based resources such as wind, solar and batteries, the Australian Energy Market Operator (AEMO) is regularly intervening to direct generators to provide system security, to make sure the market is operated securely.
The Improving Security Frameworks for the Energy Transition rule change process is considering options that would improve arrangements for maintaining security of the power system both today, and across the transition.
Supporting the power system through the transition
The Commission released a draft determination for this project in late 2022 outlining a design for a new tool that would allow AEMO to procure, schedule and optimise system security services in operational timeframes. More information on the design of the Operational security mechanism (OSM) previously proposed by the AEMC can be found in the draft determination below.
After carefully considering the proposed approach in the draft determination and stakeholder feedback to date, the Commission came to the view that there are simpler and more immediate solutions available to address the problem compared with an OSM as set out in the draft determination. This was outlined in a forward direction note released in May 2023.
Release of Directions Paper for consultation on the revised approach
The Commission has set out its proposed revised approach in a directions paper, which is open for consultation until 5pm, 28 September 2023. The directions paper explains the Commission’s rationale for the revised direction and proposes the following simpler and more immediate solutions:
- aligning the existing inertia and system strength frameworks.
- removing the exclusion to procuring inertia network services and system strength in the NSCAS framework.
- creating a new transitional NMAS for AEMO to procure security services necessary for the energy transition that cannot be procured in any existing framework.
- empowering AEMO to schedule security services with a whole-of-NEM perspective.
- improving directions transparency and compensation.
The Commission has released the proposed rule drafting with the directions paper to allow for thorough consultation, before the final determination is published in December 2023.
New name for the revised approach
The revised approach now focuses on enhancing existing frameworks to provide system security needs to support the power system through the transition. As such, the revised approach no longer seeks to implement a mechanism (the OSM) to procure and operationalise security services, as was reflected in the name ‘Operational security mechanism’.
Therefore, to clearly encapsulate the revised approach in the rule change title, the Commission has renamed this rule change the ‘Improving Security Frameworks for the Energy Transition’ Rule Change.
Overview of the rule change process
Hydro Tasmania’s rule change request, received 19 November 2019, proposed an approach where system services would be procured within the spot market and the need for system services would be determined by binding constraints. This would involve the creation of a “synchronous services market” which would be integrated with the existing energy and FCAS spot markets.
Delta Electricity’s rule change request, received on 4 June 2020, proposed an approach where system services would be scheduled ahead of time outside of the spot market. System needs would be identified through the short term project assessment of system adequacy.
The Hydro Tasmania and Delta Electricity rule change requests were consolidated on 2 February 2022, pursuant to section 93 of the NEL, under the name “Operational security mechanism” (ERC0290). The AEMC decided to consolidate its consideration of the rule change requests because both identify the need for new arrangements to schedule and procure essential system services as the proportion of variable renewable energy (VRE) increases.
Key dates for this rule change
- Rule change request received (ERC0290) – 19 November 2019
- Rule change request received (ERC0306) – 2 July 2020
- Consultation paper published – 17 July 2020
- Submissions due 13 August 2020 – see below
- Directions paper published – 9 September 2021
- Submissions due – 21 October 2021 – see below
- Rule change requests consolidated pursuant to s93 of the NEL – 2 February 2022
- Draft determination and rule due – 21 September 2022
- s107 extension of time granted to publish draft determination and rule (due to complexity of issues) – 24 September 2020, 9 March 2021, 17 June 2021, 24 November 2021, 22 June 2022, 25 August 2022
- s108A report published giving reasoning for a rule not being made within a year of initiation – 17 June 2021
- Directions paper published - 24 August 2023 – see below
- Submissions due - 28 September 2023
- Final determination and rule expected completion – December 2023
- s107 extension of time granted to publish final determination and rule (due to complexity and difficulty of issues raised by stakeholder submissions to draft determination) – 22 December 2022, 25 May 2023.