Rule Change: Open

Overview

The Commission has published a directions paper on options for the scheduling and provision of essential system services to ensure the power system remains secure in response to rule change requests from Hydro Tasmania and Delta Electricity.
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The Commission has published a directions paper on options for the scheduling and provision of essential system services to ensure the power system remains secure in response to rule change requests from Hydro Tasmania and Delta Electricity. 

Essential system services are critical to maintaining overall power system security and reliability by meeting core power system requirements. However, current market arrangements do not appropriately value the provision of all these - in part because most of these services were historically provided in abundance as a by-product from energy. Given the current transition to a new operating environment with exiting synchronous generation, AEMO are increasingly intervening to direct generators on to provide essential system services in order to make sure that the market is operated securely.

Through both rule change proposals, the Commission is considering options to evolve the existing market design to deliver secure outcomes efficiently. The focus of these rule changes is considering solutions to better procure, coordinate and optimise provision of essential system security services, that are not already provided through other means. 

The Commission published a directions paper on 9 September 2021 that presented two broad approaches to value, procure and schedule essential system services. The AEMC will publish a draft determination on 30 June 2022, taking into account stakeholder submissions to the directions paper. 

Directions Paper

The NEM’s transition away from ageing thermal synchronous fleets, which the power system was designed around toward one with increasing amounts of renewables and batteries, is pressing the limits of current system security and operational experience. While these synchronous generators supply essential system services as a by-product of energy, the transition means the current implicit provision of these services can no longer be relied on to maintain power system security. Without a means of explicitly valuing and procuring system services essential for security, AEMO must intervene for their provision – resulting in inefficient market outcomes. 

The Commission has proposed two broad approaches to address this issue. Both approaches look to efficiently schedule resources to ensure the power system remains secure and consumer costs are minimised: 

  • Market ancillary services (MAS) approach: Where the procurement of system services would be brought into the pre-dispatch engine to explicitly value and procure other system services in addition to energy and FCAS. 
  • Non-market ancillary services (NMAS) approach: Where the procurement of system services would be undertaken through of structured contracts, instead of AEMO directions, which would then be scheduled through an explicit optimisation approach. 

These approaches both reflect the solutions proposed in the rule changes themselves, as well as the unit commitment for security (UCS) and synchronous services mechanism (SSM) that was proposed by the ESB in its post-2025 market design work. The Commission has an initial preference for the NMAS approach. 

Stakeholders were invited to comment on these approaches through submissions to the directions paper due by 21 October 2021 . The submissions can be found below.

Rule change request

On 19 November 2019, Hydro Tasmania submitted a rule change request to amend the National Electricity Rules to create a market for “synchronous services". These synchronous services include inertia, voltage control and fault level/system strength.

Hydro Tasmania proposed to address the shortage of “inertia and related services” in the national electricity market (NEM) by integrating the dispatch of a “synchronous services” with the existing energy and FCAS spot markets.

Hydro Tasmania proposed to do this by changing the formulation of the constraints that are applied to the NEM dispatch engine (NEMDE). Hydro Tasmania proposed that these reformulated constraints would allow the dispatch engine to find the lowest overall cost combination of synchronous services and non-synchronous generation. This in turn is expected to deliver lowest overall costs for consumers.

Hydro Tasmania’s rule change is one of seven rule change requests the AEMC was consulted on through the system services consultation paper (the consultation paper). Submissions to the consultation paper were due on 13 August 2020 and can be found below.

The Hydro Tasmania (ERC0290) rule change has received four extensions under s. 107 of the NEL.  

On 2 December 2021 the AEMC extended the date for publication of a draft determination until 30 June 2022 under s. 107 of the NEL, due to the complexity and difficulty of the issues identified by the Commission and raised by stakeholders in submissions to the directions paper. 

The AEMC will continue to work with the other market bodies and stakeholders to better understand the implications of these rule change requests.   

The Commission also released the reasoning behind a rule not being made within a year of the initiation of the request on 17 June 2021. This s108A notice is provided below. 

Other relevant system services rule change processes underway

These rule changes form part of the AEMC’s system security work program, which complements and is interdependent with the Energy Security Board (ESB)’s advice on a long-term, fit-for-purpose market framework to support reliability that 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.  

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