System security and reliability

To keep the lights on, the power system needs to be:

  • secure – able to operate within defined technical limits, even if there is an incident such as the loss of a major transmission line or large generator
  • reliable - have enough generation, demand response and network capacity to supply consumers.

See an overview of the AEMC's system security and reliability action plan

System security

What is system security?

The power system is secure when technical parameters such as voltage and frequency are maintained within defined limits. To maintain frequency the power system has to instantaneously balance electricity supply against demand.

Large deviations or rapid changes in frequency can cause the disconnection of generation, potentially leading to cascading failures and ultimately a ‘system black’.

Spinning generators, some motors and other devices synchronised to the frequency of the electricity system have naturally provided the inertia necessary to allow the system to cope with uncontrolled changes in frequency.

However, the power system is transforming – we are seeing the widening effects of increased non-synchronous generation, such as wind and solar, and the exit of coal-fired generation.

In a market with high penetration of wind and solar, there is less inertia in the power system. This means when there is a major fault in the power system (a security event) it is harder to recover – because due to the physics of the power system you have less time to recover before a widespread blackout.

The reduction in synchronous generation has also led to a decrease in system strength in some areas of the power system. System strength relates to the size of the change in voltage for a change to the load or generation at a connection point.

A reduction in system strength in certain areas of the network may mean that generators are no longer able to meet technical standards and may be unable to remain connected to the system at certain times. It may also lead to voltage instability and a reduction in the effectiveness of the protection systems used by network businesses, generators and large customers.

What is the AEMC doing?

Finding new ways to provide inertia, respond to extreme frequency changes, and address issues around system strength is underway.

The AEMC’s system security work program is focused on developing market frameworks which allow continued takeup of new generating technologies while keeping the lights on.

Many different technical options are emerging in today’s electricity sector and we want to support further innovation. We need market mechanisms that reward the best options at the least cost to consumers.

Our power system security report sets out a package of reforms to guard against technical failures that lead to cascading blackouts, and to deliver a more stable and secure power supply to Australian homes and businesses. This includes a number of new rules to deliver a stronger, more stable power system:

  • In March 2017 we made a final rule to help protect the power system from emergencies through a new management framework for emergency frequency control schemes. These are ‘last line of defence’ mechanisms such as controlled load shedding, designed to protect against a major blackout if a sudden and unexpected loss of generation or load causes rapid changes in system frequency. The new rules require AEMO to regularly and transparently assess emerging risks caused by swapping out older synchronous generators, for non-synchronous generation technology like wind and solar.

In September 2017 we made final rules to: 

  • manage power system fault levels – keeping the system stable by making networks provide minimum levels of system strength at key locations, and requiring new generators to pay for remedial action if they impact system stability
  • improve guidelines for generating system models – requiring generators and networks to provide more detailed information about how their equipment performs so AEMO and networks have the right data to efficiently plan and operate the system

Also In September 2017 we published a consultation paper on a proposal for new technical performance standards for connecting generatorsThe rule change proponent, AEMO, considers that tighter generator technical standards are needed to help keep the system secure in the future as the changing generation mix makes the system weaker in some locations.

Our Frequency control frameworks review is underway, which is looking at ways to integrate new technologies and demand response to help keep the system secure. An issues paper was published in November 2017. A draft report is due in March 2018.

Finkel review

We contributed our expertise to the Independent Review into the Future Security of the National Electricity Market, chaired by the Chief Scientist, Dr Alan Finkel AO. Read our submission to the review.


What is reliability?

While ‘security’ relates to the stability of the power system, ‘reliability’ of the power system is about power when you need it: having enough generation, demand response and network capacity to supply consumer needs.

How are reliability levels currently set?

The reliability standard currently requires there be sufficient generation and transmission interconnection such that 99.998% of annual demand for electricity is expected to be supplied.

Put another way, the standard specifies the maximum expected unserved energy (USE), or the amount of electricity demanded by customers which is at risk of not being supplied. It is currently set at 0.0002% of the region’s annual energy consumption in a financial year.

It is not a regulatory or performance standard that is ‘enforced’ but rather it is a planning standard used to indicate to the market the required level of supply and demand on a regional basis.

The reliability standard was set by the AEMC’s Reliability Panel and is now incorporated into the National Electricity Rules. The Panel reviews the standard every four years.

State and territory governments set the level of reliability that must be provided by transmission and distribution networks (‘poles and wires’). 

Who is responsible for reliability?

The Australian Energy Market Operator (AEMO) is responsible for maintaining power system security and reliability in accordance with standards and guidelines, including those set by the AEMC’s Reliability Panel

Generation reliability

AEMO must continuously monitor levels of generation as generators retire from the market and new generators take their place.

AEMO’s Electricity Statement of Opportunities assesses supply adequacy across the national electricity market over the next ten years, taking into account any significant developments such as the closure of Hazelwood Power Station in Victoria.

In the short and medium term, AEMO assesses supply adequacy through its Projected Assessments of System Adequacy (PASA) process. This involves collecting information and analysing if electricity supply can meet the reliability standard in the short term (a one week outlook) and medium term (a two year outlook).

There are mechanisms in the national electricity rules which enable AEMO to take action if they believe the balance of electricity supply and demand will not meet the reliability standard:

  • In the first instance, AEMO can activate the reliability and emergency reserve trader (RERT) mechanism, which allows AEMO to contract for (or ‘lock in’) electricity reserves ahead of a period where it projects a shortage.
  • If there is still a shortfall in supply, AEMO will issue a market notice, inviting generators to bid any spare supply into the market. By this stage, spot prices are usually very high due to the shortage of supply relative to demand, which is an incentive for generators to offer their supply. This is how the market is designed to work.

If the response from generators to the market notices is insufficient, and there is a risk to the secure or reliable operation of the power system, AEMO can:

  • direct a generator to increase its output, but only if this is possible and can be done safely. To be effective, the generator must have enough time to ‘ramp up’. If the generating unit is not already generating, it can take time for it to connect to the network and begin to ramp up.  Gas generating units can usually turn on within a few hours if they have fuel available. Hydro plant can connect and ramp up faster than this, whereas coal generators can take several days.
  • direct a large energy user, such as an aluminium smelter, to temporarily disconnect their load or reduce their demand. This only applies to large users who are registered market participants.

If there continues to be a shortfall of generation, AEMO may require involuntary load shedding as a last resort to avoid the risk of a wider system blackout or damage to generators or networks. Network businesses shed this load following schedules provided by the relevant state government.

Network reliability

Each state and territory government retains control over how transmission and distribution reliability is regulated and the level of reliability that must be provided.

Investments in transmission and distribution networks (‘poles and wires’) are ongoing and involve a trade-off between the cost of building and maintaining the networks and the value placed on reliability by customers.

What is the AEMC doing?

In tandem with our system security program, the AEMC is undertaking a system reliability program, which includes the Reliability frameworks review, This review is considering a range of fundamental changes to market design to improve the ability of the market to deliver more capacity, and capacity valued by the power system, when it is needed – both in the short and longer term. An interim report was published in December 2017. A directions paper is due in March 2018.

The AEMC's Reliability Panel is undertaking its 2018 review of the the reliability standard and market price settings – a set of parameters that bear on price, investment and ultimately reliability in the national electricity market. The final report is due in April 2018.

In December 2017 we made a new rule to redefine the conditions when AEMO it can declare a lack of reserves (LOR) and signal to the market that electricity reserves are running low..

Our review into the coordination of generation and transmission investment is investigating options to improve the coordination of generation and network investment, including potential renewable energy zones, transmission pricing and access. An options paper is due in early 2018.

See also: