Next steps to underpin a future power system that is reliable

Reliability of the power system, at a wholesale level, is about having enough generation and demand response capacity in the system to supply customers with the power they need, with a very high degree of confidence. 

Consumers in the national electricity market experience high levels of reliability. Over the last 10 years blackouts that are the result of a shortage of generation or demand response capacity have contributed to less than a quarter of one per cent of all customer interruptions. In contrast, network outages, for example if a tree falls across powerlines, account for close to 97% of all blackouts.  

The power system is transitioning with more wind, solar and batteries entering the market and customers playing a greater role by changing their energy use in response to price signals and with the help of new technology. At the same time older generators are retiring, and this, along with rising temperatures and extreme weather events, can create challenges for the power system. 

As the power system transitions, it is more important than ever for the regulatory framework that supports reliability to be flexible and adaptable so customers continue to get power when they need it. The AEMC’s reliability work program sets out the actions underway to develop specific, targeted solutions to deliver the certainty of supply that customers want, at the lowest possible cost.

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These actions are designed to encourage the right amount of investment in generation and demand response capacity over the long term, and provide appropriate safety nets and interventions if they are needed. 

This work also addresses the need for the power system to be able to comprehensively meet consumer needs at the lowest cost before the operator has to step in to intervene with higher cost safety-net options. For example, energy users can play a vital role by turning off or reducing power use at very high demand times. This can help keep costs down by avoiding unnecessary investment in generation that’s only used for a few days a year.

Reliability work plan

The AEMC’s final report for the Reliability Frameworks Review, published in July 2018, included a collaborative work plan with a series of actions to be progressed by the AEMC, AEMO and the AER.

Action Status
1.    Improving the information available to the market so decisions made by market participants, the operator, regulators and policy makers are better-informed
AER to submit a rule change request by October 2018 requesting these amendments. AEMO to consult on and prepare a new guideline to develop its forecasting methodologies. AER intends to submit a rule change request shortly
AER to produce a quarterly report on the differences between forecast and actual values in the projected assessments of system adequacy (PASA), and pre-dispatch forecast processes. AER to submit a rule change request by October 2018 requesting these amendments. AER intends to submit a rule change request shortly
2.    Integrating demand into the wholesale market to support an active demand side.
Progress rule change requests on a wholesale demand response mechanism, supported and informed by demand response trials being undertaken by AEMO and ARENA.

Underway

On 19 July 2019 the AEMC published a draft determination on three rule change requests (from PIAC/TEC/TAI, South Australian Government, AEC) to introduce a wholesale demand response mechanism into the NEM. Under the draft rule, non-retailers would be allowed to offer demand response directly into the wholesale market for the first time. 

Development of a voluntary, short forward market that allows trading of financial contracts closer to real time.

Underway.

In April 2019 the AEMC published a consultation paper on a rule change request from AEMO to introduce a short term forward market.

Subject to the outcomes of relevant trials, AEMO should develop a rule change request regarding giving consumers the ability to contract with multiple retailers or aggregators at the same connection point (multiple trading relationships) opening up more opportunities for consumers to offer their demand response in the wholesale market.

Awaiting trial results. 

Following the outcomes of relevant trials, and the wholesale demand response rule change process, any additional rule change requests required to facilitate multiple trading relationships will be submitted. 

3.    Improving wholesale market outcomes and signals to underpin efficient investment and operational decisions.
ARENA, through trials, to continue to explore the potential for forecast improvements in the hours ahead of dispatch. AEMC to stay involved. Underway – see ARENA
Subject to the success of the trials, AEMO to submit necessary rule change requests to embed  the ability to provide self-forecasts into the regulatory arrangements. Awaiting the results of relevant trials
AEMO and the AEMC to consider what the future ramping needs of the NEM may be. AEMO and the AEMC intend to progress this later this year
4.    Adapting the intervention framework so it is fit for the purposes of a changing power system and only used when necessary.
AEMC to assess proposed enhancements to the power system's strategic reserve mechanism, the Reliability and Emergency Reserve Trader (RERT). This rule change was submitted by AEMO.

A final determination was published in May 2019 to enhance the RERT.

AEMC to consider, in parallel with the enhanced RERT rule change, whether the directions and instructions need to be updated as part of the suite of intervention mechanisms available in the national electricity market, and whether the intervention pricing and compensation framework is sufficiently nuanced to respond efficiently as the power system evolves.    
The AEMC is considering these in its investigation into system strength and intervention mechanisms in the NEM.