The Australian Energy Market Commission today unveiled reforms that will help new energy resources to connect to the grid while also providing more investment certainty for those resources. 

The AEMC has released a final rule on system strength, which is a core electrical quality that is needed for a stable power system. These reforms create a more forward looking regime so system strength is supplied where and when it is needed. 

The nation’s generation mix is changing rapidly as new energy resources including solar, wind, batteries and hydrogen enter the system. 

This is leading to higher demand for essential system services, such as system strength, which have traditionally been provided by the large synchronous generators that are operating less. System strength refers to a smooth and predictable voltage waveform.

AEMC Chair Anna Collyer said that today’s final rule was an important response to the transformation in the electricity system as it moves to a low-carbon future. 

“We expect that batteries, renewable generators and big loads like hydrogen will find it simpler, faster and more predictable to connect to the grid as a result of this decision,” Ms Collyer said. “Our approach to this rule change is a practical one, incorporating significant stakeholder input and analysis, that seeks to mitigate the consequences of inefficient market outcomes due to a lack of system strength."

“This should translate into more energy producers entering Australia’s national electricity market, which is a win for competition and a win for consumers. Without this important measure, it would be harder for cleaner new sources of energy to connect to the grid so that their energy can be transported to households and businesses.”

Today’s reforms also evolve the ‘do no harm’ obligation on new connections, with the Commission having engaged with industry’s feedback. The existing ways of providing system strength services are no longer fit for purpose and lead to delays in generators connecting to the grid. As well, the Australian Energy Market Operator (AEMO) has needed to intervene in the market when there is inadequate system strength -- including by potentially constraining renewable power. These problems all lead to higher consumer costs. 

“Today’s rule should result in greater system security, fewer costly interventions by AEMO and a system that allows easier and quicker connections of new energy resources to the grid– helping to lower costs for consumers,” Ms Collyer said.

The rule creates a three-pronged framework for providing system strength.

  1. A new obligation on transmission networks to provide sufficient levels of system strength. This will reduce the costs and delays of connections to the grid. It will keep the system secure while avoiding costly interventions and constraints that are otherwise paid for by generators connecting to the grid and customers. 
  2. New access standards for large loads like hydrogen and generators like wind farms, utility-scale solar and batteries that connect to the grid using power electronics known as inverters. By setting certain levels of technical performance, these standards will reduce the demand for system strength, helping to reduce the costs of supplying energy.
  3. Introduction of the system strength mitigation requirement that provides a clearer and more predictable way for new energy resources such as batteries to connect to the grid. Essentially, large loads and generators could either pay a charge for system strength or do their own remediation to provide their own system strength. This will replace and evolve the current ‘do no harm’ obligations.

Taken together, this is a landmark new approach to support the transitioning power system. 

“These new measures will allow investors to avoid a long, complex and potentially costly process when a new resource is connecting to the grid,” Ms Collyer said. 

“Investors will also be in a better position to clearly gauge investments by reducing the need for costly and market-distorting interventions.

“This work dovetails with the final advice recently provided to Energy Ministers from the Energy Security Board on a fit for purpose market design post 2025”