Market Review: Completed
Publication of the 2022 RSS Review Final Report
On 1 September 2022, the Reliability Panel (The Panel) published its 2022 Reliability standard and settings review (2022 RSS review) final report.
The purpose of the 2022 RSS review was to consider whether the existing form and level of the reliability standard and settings remain appropriate for the expected market conditions from 1 July 2025 to 30 June 2028. The reliability settings include the Market Price Cap (MPC), Cumulative Price Threshold (CPT), Administered Price Cap (APC), and the Market Floor Price (MFP).
The Panel has had regard to, and balanced a range of different trade-offs to determine the need for change for the review period, as well as what may be needed outside the review period as the market transitions.
The Panel’s final recommendations and report are considered in the context of:
- The review was broader in scope – with both the form and level of the standard and settings considered.
- The transition and rapid change occurring in the power system and hence more uncertainty in future market conditions.
- Considered future reliability in the context of a NEM power system that is undergoing a fundamental transition from being a capacity-limited thermal power system to a high variable renewable energy generation (VRE) and more energy-limited power system.
- Recent events, including the increase in fuel costs, the administered price period between 12 to 14 June, and market suspension from 15 June 2022.
The recommendations for the period 1 July 2025 to 30 June 2028 are:
- Form of reliability standard. To retain the current form expressed as a percentage of expected unserved energy (USE). The Panel however identifies a case to change the form for the next review period commencing on 1 July 2028 to accommodate a “tail risk metric” in combination with the existing “expected value of unserved energy standard”.
- Level of reliability standard. To retain the current level at 0.002% expected USE in a region over a financial year. The benefits of changing the level of the reliability standard are not sufficiently material to justify change. Changing the form of the standard, rather than tightening the level of the standard, is the Panel’s preferred approach to reflect the changing nature of reliability as the NEM transforms to a high VRE power system.
- Market Price Cap and Cumulative Price Threshold. The final recommendation is for three progressive annual adjustments in the level of the MPC and CPT to achieve an MPC of $21,500/MWh and a CPT of $2,193,000 (corresponding to 8.5 hours of market prices at the recommended MPC) by the end of the review period. The majority of the Panel considered the final recommendation was justified given the value of the benefit realised by consumers from enhanced future reliability outcomes as indicated by the detailed modelling performed for the review.
- Administered Price Cap. To increase the level from $300/MWh to $500/MWh. The majority of the Panel considered an increase to the level of the APC was justified to minimise undue reliance on the compensation scheme and reduce additional pass-through compensation costs to consumers. The Panel recommends the form of the APC is reconsidered in its next review with consideration of the links to the gas APC.
- Market Floor Price. To retain the form and the level at -$1,000/MWh. The Panel considered that adjusting the level of the MFP was not warranted in the absence of a clearly identifiable benefit over the review period, and considered there were unacceptable risks associated with a more deeply negative MFP which may increase systemic risk and the potential for disorderly thermal generator retirement.
The review was undertaken, and the Panel’s recommendations apply, in the context of the existing energy-only market design. The work on considering a capacity mechanism design was out of scope for this review as was consideration of the interim reliability measure (IRM).
Where the Panel has recommended changes to the form or level of the reliability standard or settings, the Panel is required to submit rule changes to the AEMC as soon as practical after the publication of the final report.
The AEMC will go through its rule change process for any change to the existing standard and settings.
A minor correction has been made in Table 1 in the Executive summary. The Table 1 CPT value recommended for 1 July 2026 has been corrected to read $1,872,000 which represents 8 hours of market prices at the recommended MPC of $19,500/MWh for that year.