Submissions invited on a market mechanism for inertia

05 September 2017

The Australian Energy Market Commission today published a consultation paper seeking stakeholder feedback on a proposed approach for introducing a market mechanism for inertia. This mechanism is being considered through a rule change request from AGL for an inertia ancillary services market.

The changing generation mix, with a higher share of wind and solar, means the power system has less inertia. Less system inertia means frequency may become volatile. If frequency changes too fast then the system is at high risk of going black.

Today’s paper builds on our recent draft rule to place an obligation on Transmission Network Service Providers to procure the minimum levels of inertia, or alternative frequency control services, needed to maintain system security  in all regions of the national electricity market.

While this draft rule provides for a minimum level of inertia, the AEMC considers that the introduction of a market to obtain and pay for inertia above this minimum level would provide additional benefits. For example, additional inertia could allow for higher interconnector flows between regions, which could improve reliability and reduce overall costs.

The introduction of a market based mechanism to realise the benefits of inertia was one of the key recommendations in our final report on the System security market frameworks review, published in July 2017. A market-based mechanism would offer an open and transparent approach that would best facilitate competition in the provision of inertia. It would also be flexible in that it would allow the level of the service to vary over time to adapt to changing market conditions.

The mechanism outlined in our consultation paper features an inertia price paid to inertia providers based on the value they provide in relieving rate of change of frequency (RoCoF) constraints between regions.

Stakeholders are encouraged to provide input on the proposed mechanism, including the various funding options for paying providers of inertia. Submissions are due by Tuesday 3 October 2017.


Media: Prudence Anderson, 0404 821 935 or (02) 8296 7817

Explainer of technical terms

What is the rate of change of frequency (RoCoF)?

The rate at which the frequency changes determines the amount of time that is available to arrest the decline or increase in frequency before it moves outside of the permitted operating bounds.

AEMO may constrain the power system to reduce the size of a potential contingency and minimise the resulting initial frequency change. Alternatively, an increase in the level of inertia in the power system would permit the occurrence of larger contingencies for a given level of initial RoCoF.