The Australian Energy Market Commission (AEMC) has made a draft determination for its ‘operating reserves’ rule change making a draft rule for a more cost-effective and immediate approach to support reliability as the power system undergoes its transformation to net zero.
The proposal is set out in a draft determination following separate rule change requests from Iberdrola Australia and Delta Electricity, seeking to introduce an operating reserve market to help respond to unexpected changes in supply and demand.
Operating reserves, or “stand-by power sources” help manage reliability and are provided by generation that is available but has not been scheduled for dispatch. These assets are rewarded via the market framework if they are required to be dispatched due to short-term changes in power system needs.
Following extensive input from stakeholders and careful analysis, the AEMC is of the view that while an operating reserve market could provide greater visibility of market participants’ reserve decisions helping to manage risks, the Commission considers that it would not offer any material performance improvements relative to the current arrangements, and would introduce significant additional costs for the market.
As Australia transitions to a net zero future, the national electricity market (NEM) is rapidly changing, transforming from a centralised, largely thermal power-based system to a decentralised system with a greater proportion of variable renewable energy (VRE) sources and storage assets, such as solar PV, wind and battery technology.
The AEMC must give weight to our reliability needs in a way that’s most cost-effective to consumers as the market transitions. After careful consideration, it has decided to propose a new rule that would increase transparency when it comes to the sharing of information about a generator’s reserves, as a more cost effective and immediate approach to addressing these issues.
The proposed change would require the publication of any energy constraints from either hydro, gas, or coal for each region at the start of each trading day. Additionally, the rule would stipulate real-time updates be disclosed on the combined state of charge for batteries.
The AEMC believes that by making more information available to the market, market participants can continue to make their own commercial and operational decisions which in turn will deliver reliability in a way that’s best for customers. In particular, it would provide useful information during days of high demand, potentially improving the provision of reserves and ensuring a smoother transition to net zero.
Written submissions on the draft determination are being accepted until Thursday 8 February 2024.