Rule Changes: Open

Inertia Ancillary Service Market

Reference:
ERC0208
Stage:
Preparation of Draft Determination
Proponents:
AGL
Project Leader:
Sebastien Henry
Date initiated:
08-Sep-2016
Overview

On 27 June 2017, the AEMC extended the period of time for making the draft rule determination with respect to the Inertia Ancillary Service Market rule change request until 7 November 2017.

On 27 June 2017, the AEMC extended the period of time for making the draft rule determination with respect to the Inertia Ancillary Service Market rule change request until 7 November 2017.

The AEMC intends to continue its assessment of this rule change request with a view to implementing a mechanism to guide the provision of inertia for market benefit.

The provision of inertia for market benefit can be distinguished from the minimum level of inertia required to maintain the power system in a secure operating state at all times.

The Commission has published a draft determination with respect to the Managing the rate of change of power system frequency rule change request from the South Australian Government, which places an obligation on Transmission Network Service Providers  to procure this minimum required level of inertia.

A market mechanism to be implemented through AGL’s rule change request will complement and build on the certainty created through the TNSP obligation by providing the ability to continuously adjust the level of service provision in real time to maximise efficiency. Ultimately, the combined TNSP obligation and market mechanism will form an enhanced framework which efficiently balances certainty and flexibility for the management of system frequency in the long term interests of consumers.

Background

On 8 September 2016, the AEMC initiated the rule making process for the Inertia Ancillary Service Market rule change request submitted by AGL.

AGL considers that the introduction of an inertia ancillary services market is an appropriate response to the declining supply of inertia in the NEM.

Historically, most generation in the NEM has been synchronous and, as such, the inertia provided by these generators has not been separately valued. As the generation mix shifts to smaller and more non-synchronous generation however, inertia is not provided as a matter of course giving rise to increasing challenges for the Australian Energy Market Operator (AEMO) in maintaining the power system in a secure operating state.

The Commission considers that the level of inertia that is required to maintain the RoCoF to a given limit can be divided into two components:

  1. Minimum level of inertia – The minimum level of inertia that is required to maintain the islanded system in a satisfactory operating state. The minimum level represents a lower bound on the level of inertia that is required to feasibly operate the system. Operating at this minimum level may require load shedding but would be sufficient to maintain the islanded system in a satisfactory operating state and avoid a system black condition. This minimum level might permit only limited interconnector flow, prior to separation.
  2. Market benefits – Additional inertia above the minimum level of inertia would allow for a more unconstrained operation of the islanded system or additional interconnector flows when not islanded. This would provide benefits of improved reliability and a lower overall cost of energy provision by alleviating constraints on the system.

The Commission considers that the ability to maintain power system security in an efficient manner would be enhanced by the development and introduction of a mechanism to obtain and pay for inertia and that this would further contribute to the NEO. However, such a mechanism will need careful design due to the potential impacts on the operation of the energy and ancillary services markets. Continued stakeholder engagement and consultation will be required in the development process.

Due to the complexity of the issues raised, on 15 December 2016 the Commission extended the period for making the draft rule determination with respect to the Inertia Ancillary Service Market rule change request until 29 June 2017. 

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