The Australian Energy Market Commission has outlined proposals to provide ways of valuing and delivering resources to back up national electricity market security at the least cost to consumers.

The AEMC is calling for stakeholder feedback on a directions paper on the options for a mechanism that would better incentivise the provision of crucial system security services from the market and lay the groundwork for supporting innovative new technologies to provide them in the future. 

As ageing thermal synchronous generators wind back or retire, the system services they provided for free as by-products of generating energy are not available in the same way. These include services like inertia, voltage control and system strength.

But these system services are still needed to ensure the security of the power system as world-leading levels of renewables, such as wind farms and solar rooftops, enter Australia’s power system. 

Where there is a shortage of these services needed to keep the grid stable, the Australian Energy Market Operator (AEMO) has been using its powers to intervene by issuing directions to generators. But this imposes costs on consumers and can distort the market. 

Today’s directions paper outlines new ways to explicitly value, procure and schedule the delivery of system security so that this can be done when it is needed, and avoid relying on directions.

“We have worked closely with our energy market body colleagues through the Energy Security Board on security, which is the most pressing issue for us,” said AEMC Chair Anna Collyer. 

“We are working on ways of ensuring that power system requirements are still satisfied, now and into the future, as more weather-driven sources of power and batteries connect to the grid and thermal generators start to exit.”

Today’s paper details options to help us move towards a future where the system is secure by having essential system services explicitly priced and valued.

At the moment, however, from an engineering perspective, the market is still learning how to specify these services. 

The options in today’s paper are about providing a transitional approach as that happens. 

This includes by considering a mechanism that would allow AEMO to make sure that the right power system assets are online at the right point in time to maintain system security -- but to do so in a more transparent and lower cost way than currently occurs. 

The mechanism could also allow the scheduling of certain contracts into the NEM, such as those for system strength that keeps voltage under control in the face of a disturbance.

Over time, as further work is done on security service specification, the use of the mechanism should transition to the provision of separate services rather than having certain configurations of assets online.  

The diverse range of resources that could provide these services include batteries, synchronous condensers and other technologies such as advanced inverters which may be able to replace many of the capabilities historically provided by synchronous generators.

The directions paper follows inter-related rule change requests. Hydro Tasmania has requested a rule change to create a mechanism for certain services. Delta Electricity has requested a rule change because of concerns that the current tools for procuring system services are insufficient. 

Submissions are due by 21 October 2021

A public briefing will be held on the paper on 20 September 2021

The paper is part of a wider work program being done alongside the ESB on finding new ways to procure and deliver essential system services as the power system evolves. 

Visit project pages here and here for more information and contact details.