Final rule made to refine generator ramp rate requirements

19 March 2015

The Australian Energy Market Commission today made a final rule to refine the requirements on generators to specify minimum rates at which they may increase or decrease output, known as ‘ramp rates’.

Electricity generators ramp up, or down, their electricity output in response to changing conditions in the wholesale market.  The rate at which this occurs is specified by generators as a component of the offers they make to the market, and, in some circumstances minimum ramp rates requirements are necessary to encourage efficient market outcomes.

Generators must submit a minimum ramp rate that is the lower of 3 MW per minute or 3 per cent of their maximum capacity, except where it can be demonstrated that a lower ramp rate is required for technical or safety reasons.

Under the final rule made today, these minimum ramp rate requirements will now be applied regardless of whether a generator combines individual physical generating units into a single aggregated generating unit for the purposes of the market dispatch process.

Bringing the minimum ramp rate requirements for aggregated facilities to a level more commensurate with individually registered facilities will result in an almost 30 per cent increase in aggregate minimum ramp rate capability across the National Electricity Market. This should increase the range of dispatch possibilities available to the market and, in turn, promote more efficient wholesale market outcomes.

In addition, rules that are applied consistently and proportionately to generators should ensure that the regulatory framework does not inadvertently influence investment decisions in favour of aggregated units. Investment based purely on commercial considerations can be expected to result in the provision of more efficient supply, in the long term interests of consumers.

The Commission assessed the impact of these changes on the market and, based on advice received from AEMO, is satisfied the more preferable final rule would maintain or enhance AEMO’s ability to manage the secure operation of the electricity system.

The original rule changes request was made by the Australian Energy Regulator, which proposed a new requirement for generator ramp rates and dispatch inflexibility profiles to reflect the technical capabilities of generating plant.

While the Commission was not convinced a change as extensive as that proposed by the AER was warranted and was concerned that the proposed rule might be difficult to apply in practice, some changes to the ramp rates provisions were deemed to support more competitive market outcomes.

The final rule will commence on 1 July 2016 to provide sufficient time for the Australian Energy Market Operator’s systems and procedures to be updated and for market participants to adjust to the new minimum ramp rate requirements.

For further information, contact:

Communications Manager: Prudence Anderson, (02) 8296 7800