Operating reserve market: Directions paper 5 January 2021

The AEMC today called for stakeholder feedback on targeted reforms to help keep the lights on in the face of increasing uncertainties as the power system transforms. 

Today’s paper accompanies the Energy Security Board (ESB) latest directions paper for the post 2025 market design work, which was also released today.

The power system is transitioning to a lower emissions generation mix, away from large, remote power stations towards a system of smaller distributed wind and solar generators.

This is impacting the security and reliability of the system. Services once provided as a by-product of incumbent generators like thermal, hydro and gas are not being provided in the same way or quantity by weather-driven power. One of these services is the provision of reserves, which are needed to ensure energy is available when we need it. 

As the system transforms, variability and uncertainty in supply and demand is increasing the risk that sufficient reserves are not available when needed to keep the lights on. This project is looking at how to best ensure these reserves are there when we need them. 

We are already managing the power system differently for supply as the nation’s generation mix changes. 

Today’s paper is another step forward in the program of integrating new technologies. It furthers the consideration of issues relating to energy reserves in the national electricity market and outlines possible options for the future power system. 

Assessing these options, with our stakeholders’ help, will allow the pursuit of focussed reforms in the long-term interests of consumers.

“We are working closely with the ESB given the interdependent nature of these rule changes that relate to the provision of reserves,” AEMC Acting Chair Merryn York said.

“These rule changes provide us with an opportunity to progress issues being considered in the post 2025 market design work that are more urgent in nature, but in a coordinated way.”

The paper relates to two rule change requests which proposed an operating reserve market and the introduction of ramping services. The rule change requests were received from Infigen Energy and Delta Electricity, respectively. 

The paper sets out the two proposed rule changes as well as two additional potential approaches to procuring reserves, and discusses the different conditions in the power system for which reserves may be needed. 

“Stakeholders have told us that reserves are important to ensuring a reliable and secure power supply as it undergoes a significant transformation,” Ms York said.

“Our work on reliability and security is about making sure that the right energy supplies are available when and where they are needed and can meet demand.  Reserves are also needed to ensure the system can be brought back to stability after issues such as the sudden loss of supply from a generator.

“This deals with matters that are about how well the current frameworks can address variability and uncertainty in conditions in the power system.”   

The AEMC is collaborating with other market bodies including the Australian Energy Market Operator (AEMO) and the Energy Security Board (ESB) to implement fit-for-purpose arrangements for the future power system. 

The AEMC’s direction paper accompanies the ESB’s post-2025 market design project directions paper, with the AEMC’s work being progressed concurrently with the ESB’s consideration of reserve services within its essential system services market design initiative. The AEMC and ESB processes are dovetailing as a single overarching reform process to define the issues and address them with targeted market reforms. 

Submissions by stakeholders in response to these rule changes on operating reserves should be provided to the AEMC by 11 February 2021

Media: Kellie Bisset, Media and Content Manager M: 0438 490041