Rule Change: Open
On 2 July 2020 the Australian Energy Market Commission (AEMC) initiated a rule change request from Infigen Energy seeking to introduce an operating reserve market in the national electricity market (NEM) to help respond to unexpected changes in supply and demand.
This rule change request is being considered as part of a wider Commission work program looking at new ways to deliver system services as the power system evolves. This work program dovetailed with the Energy Security Board’s post-2025 market design project workstream on essential system services.
A consultation paper was published on 2 July 2020 seeking feedback on this, and other related rule change requests by 13 August 2020.
A Directions Paper was released on 5 January 2021 relating to both this rule change request as well as a related rule change request proposing the introduction of ramping services (ERC0307) received from Delta Electricity. The paper:
- considers the ability of the current market frameworks to address variability and uncertainty in power system conditions, and
- outlines high-level designs for four options to procure reserve services.
A technical working group meeting was held on 22 April 2021 to present and discuss modelling commissioned to provide insights into the potential for a reserve service to benefit consumers.
On 18 November 2021 the AEMC extended the date for publication of a draft determination until 30 June 2023. This extension is due to the difficulty and complexity of the issues raised, a number of material changes in circumstances and to allow further information to become available upon which to make a more informed decision, such as, among other things:
- technical advice from AEMO relating to how key elements of the design would be implemented (AEMO's technical advice can be found in the documentation below, along with the AEMC's request to AEMO regarding the technical advice)
- data on the operation of the market under five-minute financial settlement and wholesale demand response, and
- progression of delivery of the various post 2025 reforms by the Energy Security Board, including those relating to resource adequacy.
The AEMC will continue to work with the other market bodies on understanding the need for and design of an operating reserve market. The technical advice that the AEMC will request AEMO to provide will help to provide further information to input into the Commission’s considerations. This will help the AEMC and stakeholders better understand the implications and value of an operating reserve market.
Rule change request from Infigen Energy Limited
On 19 March 2020, the AEMC received a rule change request from Infigen Energy 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.
Infigen considers this mechanism will help AEMO manage new and emerging challenges in the power system, being driven by increased variability and unpredictability in power system operation. These trends are making it more difficult to forecast, schedule and balance generation and load in the NEM.
The proposed operating reserve market comprises a dispatchable, raise-only service procured similar to contingency FCAS services in real-time and co-optimised with the other energy market services. The proposal suggests reserves could be procured 30 minutes ahead of time (with a 15-minute call time) to align with the requirement to return the system to a secure operating state within 30 minutes.
On 18 November 2021, The Commission extended the timeframe to make a draft determination to 30 June 2023.
The extension allows the Commission to take into account further information as the energy system and the frameworks that govern it rapidly evolve as set out above.
The market bodies will continue to monitor the energy market for developments in the commitment of reserves in operational timeframes.
This extension comes after the Commission’s earlier decision on 24 September 2020, to extend the timeframe for the draft determination to 24 June 2021. On 16 June 2021, the Commission again extended the timeframe to make a draft determination until 9 December 2021. The adjusted timeframes were to address the complexity and difficulty of the issues raised.
The Commission also released the reasoning behind a rule not being made within a year of the initiation of the rule change request on 17 June 2021. This s108A report is provided below.
Other relevant system services rule change processes underway
The AEMC is considering this rule change as part of its system security workstream.
These system services rule change requests complement and are interdependent with the work of the Energy Security Board (ESB) to develop 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 are considering the interactions between issues raised in the different rule changes so that any new frameworks developed in response to the rule change requests will be focused on delivering the most efficient outcomes for consumers.
The AEMC has already made final determinations to implement new fast frequency response markets and to evolve the existing system strength framework. We are prioritising more urgent system security issues while continuing to coordinate with ESB work and seek key technical input from the Australian Energy Market Operator (AEMO).