News Topic ID

Reliability standard remains robust as Australia transitions to net zero

18 April 2024

The Reliability Panel (the Panel), has found the current form of the reliability standard is well-equipped to ensure high levels of system performance as the national electricity market transitions to net zero emissions.

The insights are set out in a draft determination for stakeholder feedback, following a decision by the Panel to undertake a review of the form of the reliability standard.

The reliability standard, a critical component of Australia's energy system, ensures sufficient electricity supply to meet consumer demand and determines key market settings, such as the market price cap.

The Reliability Panel forms part of the Australian Energy Market Commission but independently monitors, reviews, and reports on the safety, security, and reliability of the national electricity system. Its panel of expert advisers represents consumers, the energy industry, and the Australian Energy Market Operator (AEMO).

An essential part of its work is looking forward to find the right mix of investment signals to create the right mix of assets to support reliability. Getting that better understanding of the future is an important step to allow consideration of the changing reliability risks as the market transforms in a way that we have never seen before.

To understand that challenge better, the Panel developed a model to create an extreme future where there aren't enough resources to meet the needs of customers.

Reliability Panel Chair, Charles Popple, says insights such as those provided by the model, are critical to making sure we have sufficient investment in generation, particularly in the type and duration of storage we need to manage reliability risk as the sector transforms.

‘’Our modelling, one of the first of its kind in Australia, provided us with interesting insights on potential reliability risks as the energy sector transitions,’’ explained Mr Popple.

‘’It demonstrated that while the risk profile may change as we transition to more variable renewable generation, the current form of the reliability standard remains sufficient to provide investment and operational signals for the assets needed to manage the minimal risk of extreme reliability shortfalls in the future National Electricity Market.

"The Panel’s draft recommendation is therefore that the current form of the reliability standard is fit for purpose and can continue to strike the right balance between affordability and reliability as we transition to net zero," he said.

The Panel acknowledges the challenges faced by the Australian Energy Market Operator (AEMO) in managing reliability with conventional tools and supports AEMO's efforts to improve communication of the reliability standard.

Additionally, the draft report recommends maintaining the current form of the administered price cap (APC), which acts as a safety net by capping wholesale prices following prolonged periods of extreme prices.

The Panel will regularly review the APC level to ensure generators and batteries continue to contribute to reliability during rare emergencies.

View the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Final rule to improve security frameworks for the energy market transition

28 March 2024

The Australian Energy Market Commission (AEMC) has today made a final rule to address system security issues efficiently and proactively through the energy transition.

The rule, shaped by extensive stakeholder feedback, builds upon existing tools in the power system to enhance system security procurement frameworks. It responds to two rule change requests from Hydro Tasmania and Delta Electricity.

As the energy market transitions, ensuring system security becomes increasingly complex.

While every day brings new information about how best to operate a future system with more inverter-based resources, the capabilities of emerging technologies are still being tested and understood and synchronous plant continues to retire. As a result, there may be periods of scarcity in essential system services.

AEMC Chair, Anna Collyer, emphasised the importance of this rule in navigating the transformation.

"As we move towards a net-zero power system, ensuring system security becomes increasingly complex. This final rule is a crucial step along the way to managing the security of the future system.

"It builds on the systems and information that we know today to deliver a secure system more efficiently and proactively, while also building our understanding to prepare us for the system needs of tomorrow.

"In this context, the reforms will address system security issues through the transition, reduce the regular and inefficient use of directions, and provide better incentives for participants to invest in providing system security.'' she said.

The  rule proactively facilitates a secure power system transition by enhancing procurement frameworks to reduce reliance on directions and drive investments in new technologies.

It will also improve cost recovery arrangements for Transmission Network Service Providers' (TNSP) non-network security contracts to promote efficiency and minimise price volatility for customers.

Further, the rule will increase transparency on current system security needs and understanding, and how the Australian Energy Market Operator (AEMO) plans to manage system security during the transition to a net-zero emissions power system.

The Commission has also introduced a new non-market ancillary service (NMAS) framework for transitional services, allowing AEMO to procure two new types of services to assist the transition to a secure net-zero power system.

Under the rule, a new annual reporting requirement known as the ‘transition plan for system security’ will be implemented, It requires AEMO to report on the steps it will take to manage system security through the transition.

Additionally, the final rule aims to improve real-time market notices and post-event directions reporting, providing more transparency to stakeholders.

For more information, visit the project page.

Media: Jessica Rich 0459 918 964 or media@aemc.gov.au

Visit project page for more information and contact details.

Final rule to enhance reserve information

21 March 2024

The Australian Energy Market Commission (AEMC) has taken another step towards supporting reliability through the transition to net zero by improving the transparency of energy market reserves in a cost-effective way.

In a more preferable final rule, the Australian Energy Market Operator (AEMO) must publish further detailed information about energy availability each day to help the market make more informed decisions that impact reliability and prices for consumers.

The Commission has opted for these improvements instead of two separate rule change requests proposing to introduce an operating reserve market.

Extensive analysis and input by stakeholders informed the AEMC’s position that an operating reserve market would lead to higher costs for consumers while not providing any material performance improvements.

As the rule maker for the National Energy Market (NEM) the AEMC is strongly focused on making sure the regulatory framework achieves reliable supply as the grid transforms while also delivering affordable electricity prices, especially during current cost of living concerns.

Chair Anna Collyer says the AEMC’s final determination to enhance the current market arrangements is a pragmatic step forward.

“By making a generator’s reserves more visible the market can better assess where they are needed, which incentivises more efficient operational and commercial decision making.

“For electricity customers, that is likely to mean improved reliability during times of high supply variability and forecast uncertainty, without the burden of higher power bills that would come with an operating reserve market,” she said.

The final rule does not place onerous reporting obligations on market participants, with most of the information required already provided to AEMO.

Near real-time data about the state of charge and maximum storage capacity of grid-scale batteries will also be included as they play a greater role in the NEM.

The decision to not implement an operating reserve market is consistent with the AEMC’s draft determination and directions paper, which received near unanimous support from stakeholders.

For more information, visit the project page.

Media: Jessica Rich 0459 918 964 or media@aemc.gov.au

Draft rule to speed up the connections needed for a cleaner future

07 March 2024

A draft determination has been published that examines how to improve the process and speed for connecting generation and storage to the grid.

The Australian Energy Market Commission (AEMC) is seeking feedback on the draft rule it has now made that relates to what is known as the 'R1' process.

During the R1 process, generators and large-scale storage providers are required to submit detailed engineering modelling and information to the Australian Energy Market Operator (AEMO) and network service providers for review.

The submission helps them achieve registration and connection to the national electricity market and grid.

As Australia undergoes a massive transformation to net zero, an unprecedented number of variable renewable energy such as wind, solar and battery projects are entering the market to replace retiring thermal plants.

Underscoring that is AEMO’s Draft 2024 Integrated System Plan. It expects that six gigawatts of new capacity will need to be added every year to achieve Australia’s emissions reduction targets for a sustainable future.

Accordingly, as of December 2023, there were 583 renewable energy projects in the connections queue waiting to receive registration with AEMO.

Chair Anna Collyer says speeding up this process would ensure that consumers enjoy cleaner and cheaper energy throughout the transition.

"At the AEMC, we are dedicated to establishing a robust framework for a stable system that delivers clean, affordable electricity.

"This reform, focused on enhancing regulatory certainty, is driven by our commitment to prioritising consumer interests and enhancing the efficiency of the energy market.

“In recognising the scale of the energy transition that is underway and the amount of generation that is needed to connect, our efforts are aimed at ensuring valuable hours are directed towards addressing critical issues that bolster system security and expedite the connections process," Ms Collyer said.

The draft determination explored a proposal from the Clean Energy Council (CEC) that noted a lack of clear obligations or timeframes in the R1 process, potentially leading to project delays.

Additionally, stakeholders identified that the electricity rules may prevent some pragmatic revisions of performance standards, which can lead to significant engineering work with minimal gain.

The draft rule aims to increase certainty in the R1 process by allowing generators to request justification for additional modelling requests. It also removes a barrier for parties to agree on reasonable revisions to a generator’s performance standards.

With renewable and battery technology expected to play a significant role in the transition, improvements to the R1 process may also help to accelerate the integration of new projects into the system, providing greater certainty to businesses and reducing costs to customers.

The AEMC commends the CEC and AEMO on their collaborative work and recommends AEMO continue improving its guidance on the specifics of how it evaluates compliance during the R1 process.

Written feedback and submissions on the draft determination and draft rule are being accepted until 18 April 2024.

View the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au.

System strength quantity calculation change

29 February 2024

The Australian Energy Market Commission (AEMC) has made a final determination and final rule to change the way the system strength quantity (SSQ) component of the system strength charge is calculated to give market participants and investors greater clarity and confidence in the framework.
The system strength framework gives connecting generators a choice between two options to reduce their system strength impact on the power system.

These participants can either pay the charge for centrally provided system strength services, or they can take proactive measures to self-remediate by installing additional equipment, like a synchronous condenser or grid-forming battery.

Having this choice encourages investors to make efficient decisions when connecting new plant or making alterations to existing plant.

To make efficient decisions about whether to remediate or pay the charge, connection applicants need the options to be broadly equivalent – and currently, they are not.

The final rule makes the two options broadly equivalent as originally intended and makes arrangements for the SSQ calculation to evolve in line with our knowledge of system strength, the technologies that provide it, and the policies that govern its provision.

Specifically the new rule:

shifts responsibility for determining the SSQ calculation from the National Electricity Rules (NER) to the Australian Energy Market Operator (AEMO), integrating it into the system strength impact assessment guidelines (SSIAG)
introduces new policy principles in the NER to guide AEMO in setting the SSQ methodology, offering clarity to stakeholders.
clarifies the process of moving from an indicative to a final SSQ
triggers an update to AEMO's SSIAG paving the way for the new measures to take effect on 1 July 2024.
AEMO intends to commence consultation to update the SSIAG in the coming weeks.

The final rule includes transitional provisions that provide details on how applicants at different stages of the connections process will transition to the new arrangements from 1 July 2024 when the new methodology takes effect.

This final rule forms part of the AEMC’s broader work monitoring and evolving system strength framework as it is implemented.

For more information and contact details visit the project page here.

Media enquiries: Jessica Rich | 0459 918 964 | media@aemc.gov.au

Unleashing the power of CER for lower bills and a sustainable energy future

29 February 2024

The Australian Energy Market Commission (AEMC) has taken a critical step as part of a broad set of reforms aimed at making it easier for households and businesses to capture the value of their customer energy resources (CER) and exercise greater control over their energy bills.

‘CER’ refers to smaller-scale energy resources owned by customers, which can produce, store, or vary how they use energy. There are newer forms of CER such as solar panels, batteries, and electric vehicles, and more traditional assets such as hot water heaters and pool pumps.

Australia’s energy landscape is being transformed by the uptake of these resources and consumers becoming more engaged in the different ways they can use them.

The Australian Energy Market Operator’s Integrated System Plan states that by 2030 at least one in eight households will have a battery or electric vehicle, or both. By 2050, that number is expected to rise to one in four. Around one in four free-standing Australian homes have solar panels, with one in two expected by 2040.

These trends represent an enormous opportunity for Australia’s energy future. CER, along with resources such as neighbourhood batteries, have an important role to play in the power system. They can help reduce overall system costs, improve reliability, and achieve a secure, low-emissions energy supply for all consumers.

Understanding this, the AEMC is prioritising vital reform that aims to unlock the full potential of CER – for the benefit of both the customer who invested in those assets and also for the benefit of all customers through the resulting improvements to the operation of the overall system.

Chair Anna Collyer says investing in these resources empowers consumers to generate, consume, store, and trade energy according to their preferences.

“By using these assets in a smart way, customers can lower their energy bills, and should they choose, share the power they generate or vary their consumption in such a way that it supports the overall grid,” Ms Collyer said.

Positions on how to unlock the benefits of CER were outlined in a draft determination paper, published today. Specifically, the AEMC is considering creating new arrangements for:

‘Flexible’ trading by enabling all customers to have CER separately metered and therefore identified and managed separately from other ‘passive’ consumer loads such as lights and fridges.
Large customers to choose multiple energy service providers for their premises.
An in-built measurement capability in technology such as streetlights and EV chargers to be used instead of additional meters, which allow for the measurement and management of energy use at lower cost.

The key benefits of this rule change could include:

Supporting customers to take up different products and services for their CER which will in turn help them to reduce consumption costs or improve the value they can get from their assets.
Promoting innovation and competition by reducing barriers for market participants to provide wholesale energy, ancillary services, and network services.
Supporting more CER integration by making it easier for those resources to be identified and managed separately, helping to deliver reliability, security, emissions reduction, and reduced costs for all consumers.

This rule change request, submitted by the Australian Energy Market Operator (AEMO), is one of several key CER workstreams the AEMC is focussed on in 2024.

We are looking at ways to create greater visibility of price-responsive resources, such as household batteries, and make it easier for them to participate in the market. We think this could help AEMO and networks to operate the system more efficiently, ultimately leading to lower prices and emissions.

We are also fast tracking rule changes we recommended last year, including a 100 per cent rollout of smart meters. While solar panels provide low-cost energy to their owners and the grid, smart meters at every home could allow non-CER owners to also benefit from the cheap energy provided by these assets.

A government CER taskforce has now been established, following Ms Collyer’s calls for urgent reform last year.

“We at the AEMC are steadfast in our pursuit of pushing reform that’s required to unlock the benefits of these resources, while also mitigating any risk that comes about as a result of the speed and scale of change.

“The key to a successful transition is integrating these resources effectively into the National Electricity Market. Our only choice is to be well prepared. If we do not properly integrate CER into market processes, we face materially higher generation, network, and intervention costs. Consumers have a critical role in the transition – but to do so – they need sound policy decisions from us all,” she said.

Visit the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Final report released on improvements to the retailer reliability obligation

29 February 2024

The Australian Energy Market Commission (AEMC) has made 12 recommendations to improve the operation of the 'retailer reliability obligation' (RRO).

The recommendations have been designed to reduce the costs for retailers while still maintaining reliability. This, in turn, will reduce costs for consumers.

One of our key recommendations is to move the timeframe for when retailers must report to the Australian Energy Regulator on how they have complied with the RRO so it is closer to the time of the relevant reliability gap.

This recommendation will make it easier for retailers to determine the level of contracting required to comply with the RRO and will mean retailers can enter contracts with new projects that come online in the lead-up to a reliability gap.

As the electricity market transitions to net zero and more renewable energy sources connect to the system, reliability needs to be carefully managed to meet the needs of households, businesses and industry.

Considering this, we are also recommending the Australian Energy Market Operator (AEMO) has more time to trigger the RRO. This will allow AEMO to assess the evolving nature of reliability gaps throughout the year.

In response to stakeholder feedback calling for further reviews into the efficacy of the RRO, the Commission has also noted that the Commonwealth should consider these areas as part of its work on the future design of the market.

The RRO was designed to encourage new investment in dispatchable energy technologies, essential for the reliable operation of the energy system. It does this by requiring retailers to establish contractual agreements with third parties when AEMO foresees a potential shortfall in energy supply. These agreements are designed to ensure retailers are adequately prepared to fulfill energy demands.

Implementation of our recommendations will necessitate adjustments to various laws, rules, and guidelines. These changes will be subject to due processes and decisions by relevant market bodies and Ministers.

Visit the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au. 

2024-25 market price cap now available

22 February 2024

The Australian Energy Market Commission (AEMC) has released updates to key reliability settings that apply to the National Electricity Market (NEM). Under the National Electricity Rules, the market price cap and cumulative price threshold for the NEM must be adjusted in line with the consumer price index by 28 February each year.

The market price cap is the maximum price that can be reached on the spot market during any dispatch and trading interval. The cumulative price threshold is the maximum price across seven days’ worth of trade.

The market price cap and the cumulative price threshold for the 2024-25 financial year, compared with the period from 1 July 2023 to 30 June 2024, are:

	1 July 2023 to 30 June 2024	1 July 2024 to 30 June 2025
Market price cap	$16,600 / MWh	$17,500 / MWh
Cumulative price threshold	$1,490,200 / MWh	$1,573,700 / MWh

The updated values and underlying calculations for 2024-25 are in a schedule of reliability settings on the AEMC website.

AEMC modelling reveals billions in potential savings through integrating virtual power plants

15 February 2024

New modelling results showcased by the Australian Energy Market Commission (AEMC) show substantial cost savings of up to two billion dollars (net present value) between 2025 and 2050. These savings are attributed to the effective integration of price-responsive resources, including virtual power plants, into the National Electricity Market (NEM).

Chair Anna Collyer says the recent analysis is set out in a paper ahead of a public forum for stakeholders next week and follows a rule change request by the Australian Energy Market Operator (AEMO) to improve its ability to forecast electricity supply and demand.

“As more households and businesses invest in newer technologies such as batteries, rooftop solar, electric vehicles, and home energy management systems, these consumer energy resources (CER) will play a vital role in the shift to a net zero energy system.

“Similarly, traditional assets such as hot water heaters and pool pumps will continue to play their part in how the energy system performs and transforms,” Ms Collyer said.

As a result of the rapid uptake of CER, energy companies are increasingly combining these resources to form Virtual Power Plants (VPPs), which are actively responding to price signals in the national electricity market (NEM).

Additionally, there are commercial and industrial resources such as chillers and hydrogen electrolysers, which could be price-responsive and significantly impact the energy market in the future.

Currently, these resources are not fully integrated into the NEM’s planning and operation functions. By making them more visible, AEMO proposes it could more accurately determine how much energy demand needs to be met and how to meet this demand.

It’s of the view that better integration of these resources could lead to more efficient network and wholesale market services, reducing the overall cost of providing reliable electricity to consumers, ultimately leading to lower prices.

New modelling by the AEMC, published today, marks the next step in our exploration of solutions to allow these resources to participate in the wholesale electricity market.

Ms Collyer explained by comparing the anticipated market operations between 2025 and 2050, the modelling explored two potential reform cases against the current scenario, wherein price-responsive resources, such as VPPs, function invisibly within the NEM.

"Positively, the findings revealed a net present value of $1.5 to $1.9 billion dollars in potential cost reductions resulting from the proposed rule change. These cost reductions encompass lower generation costs, lower emissions, reduced emergency supply requirements and a decreased reliance on additional resources to rectify imbalances in the system.

“Furthermore, the integration of these resources is anticipated to significantly increase market competition and put downward pressure on prices", she said.

Modelling indicates the benefits would start to arise as integration occurs and grows, if the rule change is made.

The next step in this rule change request involves a series of detail design decisions, informed by technical working groups and stakeholder engagement. This will inform the AEMC’s formulation of a draft rule and determination, expected to be published in the second half of the year.

The paper will delve into design solutions that not only unlock these benefits but also serve as an incentive for widespread participation.

A public forum on February 19th will offer stakeholders an in-depth overview of the AEMC’s work to date, including the benefits modelling.

Background:

On December 14th, the AEMC published an update paper for the rule change, signalling our commitment to undertaking benefits modelling to provide better insights into where and when the benefits arise.

The AEMC sets the rules for the National Electricity Market (NEM) and provides independent expert energy advice to Australia’s State and Federal Governments. It is strongly focused on providing a framework for a reliable electricity system and affordable electricity prices, particularly in light of current cost of living concerns.

It is currently working on reform that aims to unlock the full potential of consumer energy resources for the benefit of both the customer who invested in those assets and also for the benefit of all customers through the resulting improvements to the operation of the overall system.

View the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au.

Draft rules on enhancing reserve information

21 December 2023

The Australian Energy Market Commission (AEMC) has made a draft determination for its ‘operating reserves’ rule change making a draft rule for a more cost-effective and immediate approach to support reliability as the power system undergoes its transformation to net zero.

The proposal is set out in a draft determination following separate rule change requests from Iberdrola Australia and Delta Electricity, seeking to introduce an operating reserve market to help respond to unexpected changes in supply and demand.

Operating reserves, or “stand-by power sources” help manage reliability and are provided by generation that is available but has not been scheduled for dispatch. These assets are rewarded via the market framework if they are required to be dispatched due to short-term changes in power system needs.

Following extensive input from stakeholders and careful analysis, the AEMC is of the view that while an operating reserve market could provide greater visibility of market participants’ reserve decisions helping to manage risks, the Commission considers that it would not offer any material performance improvements relative to the current arrangements, and would introduce significant additional costs for the market.

As Australia transitions to a net zero future, the national electricity market (NEM) is rapidly changing, transforming from a centralised, largely thermal power-based system to a decentralised system with a greater proportion of variable renewable energy (VRE) sources and storage assets, such as solar PV, wind and battery technology.

The AEMC must give weight to our reliability needs in a way that’s most cost-effective to consumers as the market transitions. After careful consideration, it has decided to propose a new rule that would increase transparency when it comes to the sharing of information about a generator’s reserves, as a more cost effective and immediate approach to addressing these issues.

The proposed change would require the publication of any energy constraints from either hydro, gas, or coal for each region at the start of each trading day. Additionally, the rule would stipulate real-time updates be disclosed on the combined state of charge for batteries.

The AEMC believes that by making more information available to the market, market participants can continue to make their own commercial and operational decisions which in turn will deliver reliability in a way that’s best for customers. In particular, it would provide useful information during days of high demand, potentially improving the provision of reserves and ensuring a smoother transition to net zero.

Written submissions on the draft determination are being accepted until Thursday 8 February 2024.

For more information, visit the project page.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au.

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