A wide range of stakeholders have shared their views on the AEMC’s interim report for its Reliability frameworks review, ahead of the publication of a directions paper in March 2018. The submissions are now available on the AEMC’s website.
This review is looking at ways to make enough energy available for consumers when they need it – at the lowest cost.
Consumer representatives, new technology companies, generators, retailers, industry associations and private individuals have provided feedback in their submissions on a number of key areas.
Improving the accuracy of forecasting demand for electricity
Stakeholders recognise that forecasting the demand for electricity is becoming more challenging as the power system transforms to include more renewable energy, distributed energy resources and a more responsive demand side.
Some stakeholders referred to recent events, such as the activation of the Reliability and Emergency Reserve Trader (RERT) in Victoria in November 2017,where increased visibility of energy resources may have helped avoid the intervention.
Stakeholders supported improved transparency of the accuracy of forecasts, and welcomed the Commission thinking through ways this can be achieved.
Putting a value on dispatchability and flexibility
Stakeholders agree with us that it is challenging to define dispatchability and flexibility in relation to generation and demand response. However, they also recognise that clear definitions of these concepts are needed as a first step in determining whether the existing market adequately rewards them.
Many stakeholders consider that further work is needed to understand if and how dispatchability and flexibility are valued in the current framework – including the interaction with system security. For example, some consider that to better incentivise flexible, responsive technologies like batteries, we should consider introducing a market for a flexibility service.
Day-ahead markets enable financial contracts for electricity to be bought and sold ahead of the next day’s physical dispatch. We are considering the suitability of a day-ahead market for the NEM.
Stakeholders generally agree with the AEMC’s analysis of day-ahead markets set out in the interim report. Many submissions from stakeholders consider that further work needs to be done to identify the problem – if any – that would be solved by a day-ahead market. Some stakeholders commented that many features of the national electricity market – such as the contract market and pre-dispatch – already provide the same functions as a day-ahead market.
There is also a view that international examples may not be particularly relevant to Australia’s national electricity market (NEM). For example, some stakeholders commented that many of the issues that have been addressed by day-ahead markets in overseas markets do not exist in the NEM.
Some stakeholders noted there may be benefits for energy storage and demand response associated with day-ahead markets, and also that day-ahead markets could potentially address system security issues.
However, many stakeholders considered the cost of a day-ahead market could outweigh the benefits due to the substantial change to the NEM that would be required, and the potential effects on investor confidence due to the uncertainty this would create.
The approach suggested by some stakeholders is to assess how the current reserve mechanism – the RERT – is working, and what improvements can be made, before an alternative mechanism is considered.
Other stakeholders advocated for a standing strategic reserve, given that this would create certainty for governments that there would be reserves on a given day. Stakeholders also noted that any mechanism involves a trade-off between reliability and cost on behalf of consumers, which needs to be carefully weighed up.
Stakeholders noted the recent ARENA and AEMO trial to incorporate demand response into the RERT will provide useful learnings, with some stakeholders also commenting that any type of strategic reserve should enable easy access by demand response providers.
Demand response mechanism
Stakeholders expressed mixed views on whether demand response in wholesale markets is currently working. Some consider that the current market design limits the ability for demand response to participate in the wholesale market, while others said there are no regulatory or other barriers to participation.
A recurring question from stakeholders is whether the big three gentailers (AGL, Origin and EnergyAustralia) have an incentive to develop a portfolio which includes demand response, since they own both generators and retailers. Nearly all stakeholders said this is an area which needs careful consideration.
Stakeholders have disparate views on introducing a demand response mechanism. Some stakeholders consider that it is unnecessary, as evidenced by demand response already happening in the market. Other stakeholders said that the current level is sub-optimal, and a demand response mechanism could facilitate greater wholesale demand response.
View all stakeholders' submissions
Technical working group
The AEMC is also getting input from the review’s technical working group which comprises representatives from:
|Snowy Hydro||Public Interest Advocacy Centre||AER|
|InterGen Australia||Energy Consumers Australia||Stanwell|
|Clean Energy Council||Australian Energy Council||CSR Limited|
Other related work
One of the core objectives of the Reliability frameworks review is to provide a more holistic look at the reliability framework and propose a coherent package for the future. Part of this involves coordinating the review process with other related work, in particular:
National Energy Guarantee
The NEG is designed to encourage new investment in clean and low emission technologies while allowing the system to continue to operate reliably. Any changes proposed through the Reliability frameworks review will need to be integrated with the NEG where appropriate.
Implementation of recommendations from the Finkel review
The Reliability frameworks review incorporates a number of recommendations from the Finkel review. These include considering the need for a day-ahead market or a strategic reserve to help maintain system reliability and a possible demand response mechanism.
Frequency control frameworks review
The AEMC’s frequency control frameworks review is part of our system security work program. The review is considering what immediate action may be necessary to address recent frequency performance ; how to incorporate distributed energy resources into providing security services ; and the appropriate frequency control arrangements in a world with more variable generation. Our analysis includes understanding how any changes will interact with, and support, reliability frameworks.