The AEMC has made a final rule in time for summer that gives the Australian Energy Market Operator (AEMO) better ways to signal when the market needs to increase electricity supply or reduce demand at short notice.

The new rule provides AEMO with extra tools to better forecast a ‘lack of reserve’ – when the buffer of spare electricity capacity is getting too low. It also gives AEMO more flexibility in sending signals to the market to respond and restore the buffer, for example by making more generation available or by consumers agreeing to reduce their demand.

The AEMC has worked closely with AEMO on the new framework, which will be in place from January 2018. 

In making its decision, the Commission noted that the power system is changing: variable renewable generation, demand response and distributed energy resources are an increasing part of the energy mix, meaning the way we operate the system needs to change as well. 

The final rule introduces a probabilistic approach to the declaration of lack of reserve (LOR) conditions that enables AEMO to incorporate all the relevant risk factors that could affect reserve levels, enabling better projections of involuntary load shedding risks and promoting more efficient market responses. 

To improve transparency and stakeholder understanding, AEMO will be required to report quarterly on the performance of the new framework and the drivers behind LOR declarations, with the first report due in April 2018.

The final rule released today is part of the AEMC’s reliability and security work program.

About the AEMC’s reliability work program

Reliability of the power system is about having sufficient capacity to produce and transport electricity to meet consumer demand. A reliable system requires an adequate supply of capacity, as well as reliable transmission and distribution networks, and the system being in a secure operating state (‘system security’). 

The supply capacity can be provided through generation (e.g. large-scale coal, gas, hydro, storages, solar or wind) or demand response and other demand-side mechanisms (e.g. when customers reduce their electricity consumption in response to high electricity prices).

The AEMC’s system reliability program includes:

  • Reliability frameworks review - which is considering the regulatory and market frameworks needed to support a reliable supply of electricity as the power system transforms to include more variable, intermittent generation and demand-side innovation. An interim report was published today.
  • AEMC's Reliability Panel 2018 review of the reliability standard and market price settings – a set of parameters that bear on price, investment and ultimately reliability in the national electricity market. The final report is due in April 2018.
  • Review into the coordination of generation and transmission investment - which is investigating options to improve the coordination of generation and network investment, including potential renewable energy zones, transmission pricing and access. An options paper is due in early 2018.
  • Today’s new rule to redefine the conditions when AEMO it can declare a lack of reserves (LOR) and signal to the market that electricity reserves are running low. 

See also: AEMO market notifications explained – What does a ‘Lack of Reserve’ mean?

Media: Bronwyn Rosser, Communications Specialist, 02 8296 7847 or 0423 280 341