The AEMC has called for submissions on a proposal to give the market operator more flexible tools to signal when the market needs to increase electricity supply or reduce demand at short notice.

The draft rule released today is part of the AEMC’s reliability and security work program. This proposal will help the Australian Energy Market Operator (AEMO) execute its summer readiness plans.

The draft rule would give AEMO more flexibility to send early signals to the market when it forecasts a looming lack of reserve, or generation capacity, to match demand in the system.

The Commission has proposed a better forecasting approach that is more accurate and flexible.

In making its decision, the Commission noted that the power system is changing. Technology is transforming the way electricity is made and used and demand growth has slowed. At the same time, variable renewable generation and distributed energy resources are increasing as part of the energy mix meaning the way we operate the system needs to change as well.

The draft rule would introduce a new probabilistic approach that enables AEMO to incorporate all the relevant risk factors that could affect reserve levels, enabling more accurate projections of involuntary load shedding risks and promoting more efficient market responses. Responses could include demand response and an increase in generator availability in the context of looming short-term shortfalls.–

Specifically, the draft rule:

  • introduces the definition of lack of reserve conditions as: "when AEMO determines, in accordance with the reserve level declaration guidelines, that the probability of involuntary load shedding is, or is forecast to be, more than remote."
  • requires AEMO to make and regularly review guidelines that set out how it will determine a lack of reserve condition.
  • includes the factors that AEMO must take into account when creating and amending the methodology to declare LORs such as forecasting errors. 
  • requires AEMO to:
    • declare at least three LOR levels (to be called LOR1, LOR2 and LOR3 to remain consistent with the naming convention of the existing LOR framework)
    • explain how it will declare these LOR levels
    • consult with all parties, rather than with a limited group of stakeholders, when amending the guidelines
    • review the guidelines at least once every four years.

The Commission invites submissions to the draft determination by 28 November 2017.

AEMO has also published its draft guidelines alongside this draft determination. Submissions on the content of the guidelines should be sent to AEMO by 14 November 2017.