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.
New name for a revised approach
The revised approach now focuses on enhancing existing frameworks to provide system security needs to support the power system through the transition. 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’.
This rule change has been renamed ‘Improving security frameworks for the energy transition’ to reflect this revised approach.
Extension for final determination
A second directions paper was published in August, setting out the proposed approach from Commission. This closed for consultation on 28 September.
The Commission has extended the final determination publication date to 28 March 2023 to allow for further consultation with stakeholders.
The paper explains the Commission’s rationale for the revised direction and includes proposed rule drafting to allow for thorough consultation before a final determination is published. Following stakeholder feedback on the second directions paper, the Commission determined some further consultation on aspects of the proposal would be prudent before the final determination is published.
Further meetings and Technical Working Groups (TWGs) for key elements of the proposal will be carried out, as well as another formal round of consultation on the proposed Transitional Services Non-Market Ancillary Services Annual Summary (NMAS).
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 – March 2024
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, 1 November 2023