Market Review: Completed
The Australian Energy Market Commission (AEMC) has completed a review into the interim reliability measure (IRM). On 25 May 2023, the AEMC released a final report recommending that the application of IRM to the retailer reliability obligation (RRO) be extended to 30 June 2028.
The AEMC has made a final recommendation to continue the application of the interim reliability measure (IRM) to the retailer reliability obligation (RRO) to 30 June 2028. The Commission intends to review the need for the IRM past this date following the Reliability Panel’s (the Panel’s) 2026 Reliability Standards and Settings Review.
As the power system transitions to a high variable renewable energy (VRE), energy-limited power system, reliability risk, particularly tail risk, must be characterised differently. This tail risk represents low-probability events that could have a high impact on reliability outcomes.
Given the size and pace of the energy market transition between now and 2028, the Commission does not consider the removal of the IRM as a proxy risk management tool as being in the long-term interests of consumers. The Commission has taken submissions into account in balancing the options and considers that, notwithstanding the risk of increased costs, a recommendation to extend the IRM is warranted in light of the changing nature of the drivers of reliability risk.
The Commission considers that maintaining the IRM as a supplementary measure while the Panel reviews the form of the reliability standard provides greater certainty to the market on the reliability framework until July 2028.
The Commission considers the final recommendation to extend the application of the IRM to the RRO will best support the national electricity objective (NEO).
The Commission received eight submissions from stakeholders on its draft recommendation to extend the application of the IRM to the RRO by three years.
The Commission will require a rule change request to be submitted to give effect to the recommendation in the final report.
The Commission is required to review the IRM as part of its obligations under the National Electricity Rules (NER).
On 9 March 2023, the AEMC published the terms of reference for the self-initiated review and draft recommendations to facilitate stakeholder consultation.
In 2020, on the advice of the Energy Security Board (ESB), Energy Ministers introduced the IRM of 0.0006 per cent expected unserved energy (USE) as an interim measure to meet the community expectation that electricity supply remains reliable during a 1 in 10-year summer.
This tighter standard is a risk management tool for two measures designed to provide more certainty about reliability; the RRO and the Interim Reliability Reserve (IRR).
the RRO based on a breach of 0.0006 per cent USE
an out-of-market capacity reserve (an ‘Interim Reliability Reserve’) to keep unserved energy (USE) to no more than 0.0006 per cent in any region in any year.