On 8 September 2022, the Australian Energy Market Commission (AEMC) published a final determination and a final rule for enduring arrangements to support the control of power system frequency and incentivise plant behaviour that reduces the overall cost of frequency regulation during normal operation.

The core elements of the final rule are:

• Confirmation that the mandatory primary frequency response (PFR) arrangements will continue beyond 4 June 2023. This will mean that all scheduled and semi-scheduled generators will continue to be required to respond automatically to changes in power system frequency.
• Introduction of a new double-sided frequency performance payments process to encourage plant behaviour that helps to control power system frequency. These arrangements will value helpful frequency response from any eligible unit of generation or load with appropriate metering.
• New reporting obligations for the Australian Energy Market Operator (AEMO) and the Australian Energy Regulator (AER) in relation to the levels of aggregate frequency responsiveness in the power system and the costs of frequency performance payments. 

The Commission acknowledges stakeholder feedback expressing concern for the proposed confirmation of Mandatory PFR and the requirement for generators to be sensitive to small changes in power system frequency. The Commission notes that the Reliability Panel is in the process of reviewing the Frequency operating standard (FOS), including the settings related to the sensitivity for mandatory PFR. The Commission expects that the Reliability Panel will also recommend the timing for a subsequent future review of the FOS which will allow for settings in the FOS, including those that relate to Mandatory PFR, to be further reviewed following a sufficient period of operational experience with the new frequency performance payments in effect.

Background    

On 3 July 2019, AEMO submitted a rule change request relating to the observed degradation of frequency performance in the national electricity system during normal operation and suggested ways of improving incentives for provision of primary frequency response. 

Consultation on the rule change request commenced on 19 September 2019, when the AEMC published a consultation paper for this rule change request, along with two other rule change requests related to primary frequency response. These other rule change requests were consolidated under the Mandatory primary frequency response rule change project, for which a final determination and rule published on 26 March 2020, which introduced temporary arrangements for the provision of mandatory primary frequency response, while enduring arrangements (the subject of this rule change) are being developed.

On 17 December 2020, the Commission published a directions paper on the arrangements for fast frequency response and primary frequency response in the NEM. The Commission received 29 submissions to the Directions paper which informed the development of its draft rule determination, and which can be found below.

On 16 September 2021, the Commission published a draft determination and draft rule. As in the final rule, the draft rule included:

• Confirmation of mandatory primary frequency response (PFR) as enduring beyond the sunset date on 4 June 2023.
• new incentives, through frequency performance payments, for market participants to operate their plant in a way that helps to control power system frequency.
• new reporting requirements for AEMO and the AER.

The Commission received 22 submissions in response to its draft rule determination, and which can be found below.

On 19 May 2022 the Commission published a second directions paper, which described a revised frequency performance payments process. The revised process responded to stakeholder feedback on the draft rule and was developed in collaboration with AEMO, IES Consulting, and the AEMC frequency control technical working group. 

The Commission received 8 submissions in response to the second directions paper, and which can be found below.