Rule Change: Open
On 2 July 2020 the Australian Energy Market Commission (AEMC) initiated a rule change request from Delta Electricity 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.
Providing stakeholder feedback on the directions paper
The Commission is interested in stakeholder feedback on the proposed direction and whether there is merit in pursuing the two incremental improvements.
Written submissions must be lodged with the Commission by 31 August 2023.
Rule change request from Delta Electricity
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 timeframe for a draft determination has been extended
The draft determination deadline was extended in November 2021 to provide time for the Commission to consider:
- data on the provision of in-market reserves following the implementation of five-minute financial settlement and the wholesale demand response market
- the impacts of federal policy announcements, including the capacity investment scheme
- AEMO’s technical advice, delivered to the Commission late in 2022.
In June 2023, the Commission further extended the timeframe to make a draft determination to 5 October 2023. This extension will allow the AEMC to publish a directions paper in August 2023, outlining the proposed way forward on these rule changes, reflecting our consideration of the above matters, and seeking stakeholder feedback prior to the development of a draft determination.
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
- Draft determination expected publication – 5 October 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