Rules to support the reliable supply of energy
Australia must have enough electricity available when people need it, and at the lowest cost. We want to encourage the right amount of investment in the power system’s long-term capacity so the operator isn’t forced to intervene more than necessary with higher cost safety-net options.
We are changing the rules to encourage the efficient adoption of new technologies and more transparent information so decisions made by market participants, the operator, regulators and policy makers are better informed, and based on what customers and the power system need.
This includes providing advice on efficient ways of transitioning towards a lower emissions power system over time.
Encouraging the right amount of investment in the power system's long term capacity
Short term forward market
In April 2019 we published a consultation paper on a proposal from the Australian Energy Market Operator (AEMO) to introduce a short term forward market to enable participants to contract for electricity the week leading up to dispatch. This could help demand response providers and renewable generators manage risk and compete.
Enhancement to the Reliability and Emergency Reserve Trader mechanism
In May 2019 we published a final rule to boost the power system’s strategic reserve mechanism so it has the flexibility to effectively protect the reliability of the national electricity market at the lowest cost possible to consumers. The reliability and emergency reserve trader (RERT) is a safety net which enables the system operator, AEMO, to pay a premium for ‘out of market’ generation or demand response to be on standby when it forecasts supply shortages ahead.
Updating values of customer reliability - In July 2018 we made a final rule making the Australian Energy Regulator (AER) responsible for calculating and updating values of customer reliability, which are used to develop reliability standards.
Improving the transparency and consistency of medium term reliability forecasts
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.
Reliability frameworks review - In July 2018 we 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. Recommendations are now being progressed through our reliability work plan.
Review of the reliability standard and market price settings
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.
Extra tools to better forecast a ‘lack of reserve’
In December 2017 we made a new rule that gives AEMO better ways to signal when the market needs to increase electricity supply or reduce demand at short notice. The new rule provides AEMO with extra tools to better forecast a ‘lack of reserve’ – when the buffer of spare electricity capacity is getting too low. It also gives AEMO more flexibility in sending signals to the market to respond and restore the buffer, for example by making more generation available or by consumers agreeing to reduce their demand.
In November 2017 we changed the financial settlement period for the wholesale electricity spot market from 30 minutes to five minutes. Price signals that align with physical operations lead to more efficient bidding and operational decisions and will underpin investment in capacity the power system needs. This will include fast response technologies, such as batteries, gas peaker plants and demand response. Over time, more efficient investment will flow through to lower wholesale costs, which should lead to lower electricity prices than in a market with 30 minute settlement.
Advice on energy and emissions
New technologies provide opportunities and challenges. The AEMC is supporting the transition to a lower emissions power sector by making rules and providing advice on:
- integrating energy and emissions policy
- least cost solutions to keep the lights on as the power system transitions
- integrating new technology into the power system by identifying and addressing potential barriers in regulatory frameworks.
- movements in electricity wholesale and retail prices
- investment incentives and risk allocation frameworks
- the level of consumer engagement with the market.
It is important to design policies that can reduce emissions while also providing reliable and affordable power to consumers.
The AEMC has highlighted the importance of integrating emissions reduction policy with the existing energy market structures in previous advice to government.
For example, our 2016 Review on the integration of energy and emissions reduction policy analysed the characteristics and impacts on the energy market of three emissions reduction policy mechanisms, and our 2009 Review of energy market frameworks in light of climate change policies analysed the impact of environmental policy uncertainty on Australia’s energy market. Links to other key reports can be found at the bottom of this page. As a member of the Energy Security Board, the AEMC worked on the development of the national energy guarantee (NEG) as a way to encourage new investment in clean and low emissions technologies while allowing the electricity system to continue to operate reliably.
AEMC’s system security and reliability action plan
Our work to encourage efficient investment in the future power system is part of the AEMC’s broader system security and reliability work program. We are developing market frameworks which allow continued take-up of new generating technologies while keeping the lights on at the least cost to consumers.