The Australian Energy Market Commission (AEMC) has published a consultation paper seeking stakeholder feedback on six proposed changes to the National Electricity Rules.

The proposals outline new ways to deliver essential system services that keep the power system operating within key technical settings. 

As the power system transitions to a lower emission generation mix, moving away from a system of large, remote power stations towards smaller, distributed generators, this is impacting on both security and reliability of the system.

These impacts include:

  • Concerns that reliability is becoming more challenging to maintain as the supply/demand balance tightens
  • The technical characteristics that keep the system safe and secure are becoming harder to manage because these services — once provided as a “by-product” of generating electricity — are not being provided in the same way or same amount anymore

The AEMC said Australia is in need of new ways of delivering these “system services” to keep the power system within safe limits and to provide a secure and reliable service to consumers. 

This is reinforced by the Australian Energy Market Operator’s (AEMO) Renewable Integration Study. The stage 1 report finds that in the next five years, the National Electricity Market (NEM) will continue its significant transformation to world-leading levels of renewable generation, testing the boundaries of system security and current operational experience.

The AEMC has already implemented a range of reforms to meet immediate system security needs over the course of 2018 and 2019. 

However, in 2019 the AEMC identified system security as one of its top priorities. This was reinforced by the Energy Security Board’s (ESB) Health of the NEM report in February 2020, which noted that security was the issue of most concern to the ESB. 

Building on the initial reforms, the AEMC said Australia will need to rethink the way system services are provided, so that they support the evolving power system, and are efficient and effective now and into the future. 

The AEMC said stakeholders have also recognised this need, and put forward six proposals to deliver services like system strength, inertia (the ability of the system to stabilise frequency), frequency response and operating reserves in new ways. 

A variety of new arrangements have also been proposed by stakeholders, leveraging existing and new technologies. 

Each proposal seeks to deliver better system security and reliability outcomes for consumers as the power system evolves.

The rule change requests include:

  • Synchronous services markets (Hydro Tasmania) — a proposal to create a market for synchronous services such as inertia, voltage control and fault level (also known as system strength) 
  • Operating reserve market (Infigen Energy) — a proposal to introduce a reserve market to operate alongside the existing energy and frequency control markets, to help AEMO manage new and emerging operational challenges
  • Fast frequency response market ancillary service (Infigen Energy) — a proposal to introduce new fast frequency control services to efficiently manage power system risks associated with reduced system inertia 
  • Efficient management of system strength on the power system (TransGrid) — a proposal to allow networks to be more proactive in the provision of system strength in the NEM. The request proposes to abolish the “do no harm” obligation and substantially amend the minimum system strength requirements  
  • Capacity commitment mechanism for system security and reliability services (Delta Electricity) — a proposal to introduce an ex-ante, day ahead capacity commitment mechanism and payment to provide access to operational reserve and other required system security or reliability services
  • Introduction of ramping services (Delta Electricity) — a proposal to introduce 30-minute raise and lower “ramping” services using the existing framework for frequency control ancillary services (FCAS) market design. These services help maintain the frequency of the NEM

These system services rule change requests complement, and are interdependent with, the work of the ESB to develop advice on a long-term, fit-for-purpose market framework to support security and reliability that could apply from the mid-2020’s. 

These rule changes provide the AEMC with an opportunity to complement the thinking and assessment done in the ESB work program, as well as technical input from AEMO through its renewable integration study. 

The AEMC said this allows it to address the issues in a cohesive way, as well as addressing system security issues that are more urgent in nature. 

The AEMC is working closely with the ESB and the other market bodies as it progresses these rule change requests, given these rule change requests dovetail with this other work. 

The AEMC said it is mindful of the challenge for stakeholders engaging in the large volume of regulatory reforms under way and is consulting on the rule change requests together, in one single consultation paper, to help reduce this overall burden.  

Stakeholders are encouraged to consider and comment on the interactions between issues raised in the different rule changes.   

Submissions by stakeholders in response to the system services rule changes should be provided to the AEMC by 13 August 2020.

Following receipt of stakeholder submissions, the AEMC will update stakeholders on the next steps for each of the work streams and the related rule change requests, including timing. This will include consideration of how each rule change request can dovetail with other work underway, such as that by the ESB and AEMO.

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