The AEMC has revised the milestones for the Enhancement to the Reliability and Emergency Reserve Trader rule change request, reflecting the complexity and cost implications of the issues being considered, and to allow time for other key inputs to the request to be received.
The request, from the Australian Energy Market Operator, is proposing broad changes to the RERT framework. The RERT is a type of strategic reserve that allows AEMO to contract for additional reserves when a supply shortfall is forecast.
The draft determination will now be published on 31 January 2019. The extension will enable advice from the Reliability Panel and AEMO on the appropriateness of the reliability standard to be considered as part of the rule change request. The reliability standard is important because the RERT can be triggered and so procured if AEMO forecasts that the standard will be breached. The Reliability Panel’s advice was released today and AEMO’s advice will be available in November.
In addition, the Commission will publish an options paper later this month on:
- how the RERT procurement trigger could be designed
- how the RERT procurement volumes could be set
- how we will consider the appropriateness of the reliability standard.
We will hold a stakeholder workshop in Sydney in November 2018 to discuss the options paper and gather feedback (registration details to come).
The Commission has also established a technical working group comprising AEMO, generators, network businesses, retailers and consumers groups to inform our thinking on the rule change request. The minutes from the first meeting of this group are now available on the project page.
This rule change request is being progressed as part of the Commission’s broader system security and reliability work program. This includes an urgent rule we made in June 2018 to extend the period allowed for AEMO to contract for reserves ahead of a shortfall, so that is in place for this summer if needed.
Media: Bronwyn Rosser, Communications Specialist, 0423 280 341; (02) 8296 7847 or email@example.com
What is the RERT?
The RERT is one of the tools available to AEMO to help avoid blackouts. It is a type of strategic reserve that allows AEMO to pay a premium for additional generation or demand response that is not already in the market to be on stand-by when shortages are projected.
It is an important part of the regulatory framework that AEMO uses as a safety net at times when a supply shortfall is forecast, or, where practicable for power system security. These additional reserves may only be used as a last resort to avoid unnecessary blackouts, typically during summer when the demand and supply balance is tight.
Prior to 2017, AEMO had only entered into RERT contracts three times and it had never been dispatched. This changed in 2017, when AEMO entered into a number of reserve contracts and dispatched the RERT twice – once in November 2017 and once in January 2018.
Some form of mechanism that allows the operator to contract for reserves has existed since the start of the national electricity market and has underpinned the high levels of reliability experienced to date.
What are the costs of the RERT?
The RERT is an important safety net that underpins reliable electricity supply; however it does carry direct and indirect costs. The direct costs of the RERT last summer amounted to $51.3 million. The indirect costs are due to the distortionary effects the RERT can have on market outcomes - for example if a generator which would otherwise have participated in the wholesale market withdraws to offer its capacity to the RERT instead. This could lead to increased costs for consumers – both from the costs of the RERT, as well as higher wholesale prices due to a reduction in supply.
The RERT has been designed to minimise these costs. Importantly, the RERT may only be used for reliability purposes if AEMO identifies a breach of the reliability standard. The reliability standard has been set to balance the prices paid for electricity and the cost of not having energy when it is needed.