Keeping the energy system secure and reliable
The electricity market is transforming, with a large number of wind and solar farms, and storage including pumped hydro, set to connect in coming years while older synchronous generators are retiring.
There are more customer-connected distributed energy resources like rooftop solar and storage joining the system, along with a more active demand side (when consumers change their energy use in response to price signals).
While this transformation to a lower emissions future provides new opportunities for consumers, it also raises new challenges for the reliability and security of electricity supply. A power system is:
- reliable when there is enough generation, demand-side and network capacity to supply customers with the energy they demand, with a very high degree of confidence.
- secure when it is able to operate within defined technical limits, such as frequency, even if there is an incident such as the loss of a major transmission line or large generator.
In July 2018 the Commission delivered two major reports setting out the changes that need to be made to market and regulatory frameworks to keep the lights on at lowest cost as the system transforms. These reviews also address a number of recommendations from the Finkel Panel’s Independent review into the future security of the NEM.
Reliability frameworks review
Our Reliability frameworks review looked at:
- market mechanisms that guide investment and operational decisions to deliver reliable power supply, and
- tools that can be used to intervene if the market doesn’t deliver reliable power supply.
Learn more about actions recommended by the Reliability frameworks review.
Frequency control work plan
The frequency of the power system varies whenever the electricity supply does not precisely match customer demand. The gradual shift toward more variable sources of electricity generation and consumption, and difficulties in predicting this variability, increases the potential for imbalances between supply and demand that can cause frequency disturbances. At the same time, there has been a reduction in the frequency control services provided by conventional technologies, which is requiring newer technologies to innovate to provide these services.
The Commission has already introduced a range of new tools and obligations to address the immediate system security needs of the transforming system. Our Frequency control frameworks review recommended further changes to the market and regulatory frameworks to maintain effective frequency control as the generation mix changes.
The final report for the frequency control frameworks review included a work plan that documents actions being undertaken by AEMO, the AER and the AEMC to address the issues identified through the review in relation to frequency control.
Learn more about our Frequency control work plan.
AEMC’s system security and reliability action plan
The AEMC’s system security and reliability work program is focused on developing market frameworks which allow continued take-up of new generating technologies while keeping the lights on at the least cost to consumers.
In December 2018 we published a final report for our Review into the coordination of generation and transmission investment. The report recommends a comprehensive reform package to improve the coordination of investment in electricity generation and transmission to help protect consumers from paying too much.
Also in December 2018 the Reliability Panel published a draft determination for its Review of the Frequency operating standard review. On the advice of AEMO, the Panel maintained the existing settings in the FOS in relation to these issues, noting that the immediate priority is the joint AEMC-AEMO frequency control work plan.
In November 2018 we made a final rule making generators to give at least three years’ notice before closing.
In September 2018 we:
- made significant changes to technical performance standards for generators seeking to connect to the national electricity grid, and the process for negotiating those standards. Under the final rule, a connecting generator's technical requirements are matched to local power system needs rather than a one-size-fits-all approach. This is key to keeping costs down for consumers.
- made a new rule for AEMO to establish a register of distributed energy resources, including small-scale battery storage systems and rooftop solar. The register will give network businesses and AEMO visibility of where distributed energy resources are connected to help in planning and operating the power system as it transforms.
Also in September 2018, the Reliability Panel started its annual review of the reliability, security and safety of the national electricity market for the period July 2017 to June 2018. The review is designed to help governments, policy makers and market institutions monitor the performance of the power system, and identify improvements to the various measures available for delivering reliability, security and safety. A final report is due by the end of June 2019.
In July 2018 we:
- made a final rule making the AER responsible for calculating and updating values of customer reliability, which are used to develop reliability standards.
- published a final report for our Frequency control frameworks review which recommended further changes to the market and regulatory frameworks to maintain effective frequency control as the generation mix changes.
- published a final report for our Reliability frameworks review. This review considered the regulatory and market frameworks needed to support a reliable supply of electricity as the power system transforms to include more variable, intermittent generation and demand-side innovation.
In June 2018 we reinstated the long notice reliability and emergency reserve trader (RERT) scheme to allow AEMO to procure generation and demand response capacity nine months ahead of a projected reserve shortfall. The RERT is a type of strategic reserve available to AEMO to help avoid blackouts. Also, we are currently considering a rule change request from AEMO for broader changes to the RERT framework. A draft determination is due in January 2019.
In May 2018 we published a new rule to improve the transparency and consistency of medium term reliability forecasts to signal whether or not electricity supply is projected to meet demand in the medium-term.
In April 2018 the AEMC's Reliability Panel published its four-yearly review of the reliability standard and market price settings – a set of parameters that bear on price, investment and ultimately reliability in the national electricity market. The Panel found that the current standard and balances the prices consumers pay for electricity against the cost to consumers of not having electricity there when it’s needed.
In December 2017 we made a new rule to redefine the conditions when AEMO it can declare a lack of reserves (LOR) and signal to the market that electricity reserves are running low.
In September 2017 we made final rules to:
- manage the rate of change of power system frequency – enabling better frequency control by making networks provide minimum levels of inertia and, with AEMO approval, enabling networks to contract with suppliers to provide inertia substitutes
- manage power system fault levels – keeping the system stable by making networks provide minimum levels of system strength at key locations, and requiring new generators to pay for remedial action if they impact system stability
- improve guidelines for generating system models – requiring generators and networks to provide more detailed information about how their equipment performs so AEMO and networks have the right data to efficiently plan and operate the system.
In March 2017 we made a final rule to help protect the power system from emergencies through a new management framework for emergency frequency control schemes. These are ‘last line of defence’ mechanisms such as controlled load shedding, designed to protect against a major blackout if a sudden and unexpected loss of generation or load causes rapid changes in system frequency. The new rules require AEMO to regularly and transparently assess emerging risks caused by swapping out older synchronous generators, for non-synchronous generation technology like wind and solar.