The Australian Energy Market Commission (AEMC) has today announced its final determination not to create a new, real-time trading market for inertia. The decision concludes that existing system security frameworks, recently enhanced by the AEMC, are sufficient and flexible to manage the grid’s stability efficiently for the foreseeable future.

The Commission's evidence-based analysis found that implementing a complex, new market for inertia at this time would be a costly and unnecessary change that would not deliver net benefits to Australian energy consumers.

Safeguarding Consumer Interests

AEMC Chair Anna Collyer said the final determination reflects a measured, timely, and proportionate approach to managing the grid’s rapid transition.

“This is a prudent decision that protects consumers from unnecessary costs. Our analysis shows that under current conditions, the estimated $5 - $10 million in upfront costs, plus millions more in ongoing operation, would far outweigh the modest expected benefits,” Ms Collyer said.

“This is fundamentally about getting the timing right. We have found that the necessary inertia supply is already being secured through work being done to ensure system strength.”

Ms Collyer emphasised that investments in a wide range of assets, including synchronous condensers, gas plants with clutches (allowing turbines to operate as condensers), and grid-forming inverters, are being installed to meet system strength standards, with these assets delivering inertia as a substantial co-benefit at minimal marginal cost to consumers.

“We are not waiting to act. We are acting by ensuring recently made security reforms, which include trialling new technologies and ways of providing system security services, have time to be fully rolled out before we introduce another layer of complexity,” she said.

Economic Efficiency and Future Readiness

The final determination is grounded in the principle that reforms should be introduced when they are clearly in the long-term interests of consumers.

• Costs Don't Stack Up: Under all current and expected modelling scenarios, the costs of implementing and operating a spot market for inertia would exceed the projected benefits.
• Co-benefits of Supply: Inertia requirements are expected to be comfortably met because Transmission Network Service Providers (TNSPs) are already procuring system strength to protect against network faults. The inertia delivered by these projects is expected to exceed minimum requirements for the foreseeable future.
• Preserving Option Value: The Commission determined that delaying the market provides time for vital technical work, such as real-time inertia measurement and accurate quantification of synthetic inertia, to progress. This crucial work, already being progressed by AEMO, will better inform future market design should it become necessary.

Security through Ongoing Monitoring

The AEMC’s determination ensures that a real-time inertia market remains an option if system conditions change.

The Reliability Panel has been tasked with actively monitoring the system to determine when conditions would suggest that operational procurement for inertia could provide benefits. The AEMC will amend the Panel’s annual Reliability and Security Report to include a mandatory section tracking key inertia-related metrics.

If the Panel’s monitoring finds that the system’s need for, or the cost of, inertia has evolved to the point where an operational market would deliver clear consumer benefits, it can formally request the Commission to reconsider the reform.

What is Inertia

Inertia is a power system service that acts like a shock absorber and helps maintain the grid’s stability.

It is the resistance to sudden bumps or gaps in electricity supply by slowing the rate of frequency change. When a large generator or transmission line trips out, inertia slows the rate at which frequency declines, providing critical time for other services to respond and prevent a blackout.

Historically, thermal plants have supplied the vast majority of inertia to the grid through their heavy spinning turbines. As these plants retire, the grid needs new, non-traditional sources, such as synchronous condensers and grid-forming inverters in batteries, to maintain this essential stability service.

For more information, please visit the project page for Efficient provision of inertia

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au