Market Reviews: Open

Reliability Standard and Settings Review 2018

Reference:
REL0064
Reviewed by:
Reliability Panel
Initiated by:
Reliability Panel
Date initiated:
30-Mar-2017
Project Leader:
Jackie Biro
Overview

In accordance with National Electricity Rules (the rules), the Reliability Panel is required to review the reliability standard and settings every four years. The Panel has started the 2018 review and will publish its final report by 30 April 2018.

In accordance with National Electricity Rules (the rules), the Reliability Panel is required to review the reliability standard and settings every four years. The Panel has started the 2018 review and will publish its final report by 30 April 2018. 

On 6 June 2017 the Panel published an issues paper to facilitate consultation and seek stakeholder views for the 2018 review. Stakeholder submissions will inform the Panel’s assessment of the standard and settings. Submissions closed 12 July 2017.

Through this periodic review the Panel considers whether the standards and settings remain suitable for the market, given the significant changes currently underway in the energy sector. The 2018 review is to consider the standard and settings to apply on and from 1 July 2020.

The Panel will carry out the review in accordance with the requirements set out in the rules and will also be guided by the Review of reliability standard and settings guidelines, final guidelines, which were completed in 2016.

The previous review was undertaken in 2014 Reliability standard and settings review.

If the Panel decides that a change to the reliability standard or any of the settings is required, it may propose a rule change request to the AEMC to implement this change in the rules.

The reliability standard and reliability settings

The reliability standard is an ex-ante planning standard. It feeds into various NEM wholesale pricing parameters that form part of the framework in which investment decisions to meet consumer demand for electricity are made. The current standard, expressed in terms of the maximum expected unserved energy (USE), is set at a maximum USE of 0.002 per cent of the total energy demanded in each region per financial year.

The reliability settings comprise four price mechanisms: 

  • The market price cap which is the maximum market price that can be reached in any dispatch interval and is currently set at $14,000/MWh (2016-2017). As of 1 July 2017 the market price cap will be set at $14,200/MWh (2017-2018) in line with the consumer price index.
  • The cumulative price threshold is the maximum total energy price that can be reached in a time period of 336 trading intervals, and the maximum total frequency control ancillary services price that can be reached in a period of 2160 dispatch intervals, before an administered price period commences and the administered price cap is applied to market prices. The cumulative price threshold is currently set at $210,000 for the energy market (2016-2017), and at six times the energy market value for frequency control ancillary services markets.  As of 1 July 2017 the cumulative price threshold will be set at $212,800 (2017-2018) in line with the consumer price index.
  • The market floor price is the minimum price that can be reached in any dispatch interval and in any trading interval and is currently set at -$1,000/MWh.
  • The administered price cap is the maximum settlement price that applies during an administered price period and is currently set at $300/MWh.

Collectively these reliability settings:

  • establish the price envelope within which energy supply and demand is balanced in the wholesale market.
  • allow the market to send price signals to market participants, and create incentives to enter into hedging contracts, to support investment in sufficient generation capacity or demand side response to meet the reliability standard.
  • limit financial risk for market participants.

 

AEMC Director, Christiaan Zuur (02) 8296 7841 or christiaan.zuur@aemc.gov.au

AEMC Senior Advisor, Jackie Biro (02) 8296 0606 or jackie.biro@aemc.gov.au

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