Market Review: Open

Overview

The AEMC is conducting a review of the market and regulatory arrangements necessary to support the effective control of system frequency in the National Electricity Market (NEM).
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The AEMC is conducting a review of the market and regulatory arrangements necessary to support the effective control of system frequency in the National Electricity Market (NEM).

Issues paper and progress update

The AEMC published an issues paper on the review on 7 November 2017. The issues paper provides an overview of the existing frequency control framework, discusses a range of potential issues associated with the current framework, and sought stakeholder feedback on these matters.

The AEMC received 18 written submissions on the issues paper, which are available below.

On 19 December 2017 the AEMC published a progress update on the review, which provides:

  • an overview of the three main streams of work under the review – primary frequency control, frequency control ancillary services (FCAS) markets, and the participation of distributed energy resources in system security frameworks
  • a summary of stakeholder views on these issues, as set out in submissions to the issues paper
  • the AEMC’s proposed next steps for each of the work streams. 

The review forms part of the AEMC’s ongoing system security work program. Specifically, it represents continued consideration of, and collaboration with stakeholders on a number of recommendations made by the AEMC in the System security market frameworks review and the Distribution market model project, including:

  • whether mandatory governor response requirements should be introduced to lessen the deterioration in the frequency performance of the power system, and any consequential impacts of this
  • the most appropriate ways to incorporate fast frequency response services, or alternatively enhance incentives for these services within the current six second contingency service
  • longer term options to facilitate co-optimisation between frequency control ancillary services and inertia provision
  • the suitability of the existing frequency control arrangements in light of likely increased ramping requirements as more variable generation technologies connect and existing 'dispatchable' capacity retires
  • the capability of distributed energy resources to provide system security services, and the regulatory, technical and commercial opportunities and challenges associated with such participation.

Background

The changing generation mix is creating challenges for the control of power system frequency. Greater variability in supply from intermittent generating technologies has the potential to make it increasingly difficult for the Australian Energy Market Operator (AEMO) to balance supply and demand. Analysis undertaken for AEMO also reflects that, in recent years, the frequency performance of the power system under normal operating conditions has deteriorated due to changes in the provision of frequency response capability.

The AEMC considers that it is timely to assess whether the current market and regulatory arrangements to support effective control of system frequency are appropriate in light of these issues, and what opportunities there are for the changing generation mix to help AEMO maintain power system security.

The AEMC self-initiated this review under Section 45 of the National Electricity Law and published its terms of reference on 7 July 2017. 

Collaboration

The AEMC has established a Technical Working Group for the review to provide technical advice on the issues under consideration. The Technical Working Group comprises network service providers, generators, retailers, energy service providers, consumer representatives, AEMO and the Australian Energy Regulator (AER).

The AEMC has also established a Reference Group – comprised of the Senior Committee of Officials, AEMO and the AER – to provide strategic advice on the review.  

Next steps

The AEMC is due to publish a draft report on the review in March 2018. 

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