Next steps to underpin a future power system that is reliable

The recommendations of the Reliability frameworks review’s final report were released 26 July 2018. They are about developing specific, targeted solutions to deliver the certainty of supply that customers want, at the lowest possible cost.

The Commission has and will continue to improve the regulatory frameworks that support the delivery of reliable electricity supply. These actions will encourage the efficient use of new technologies and businesses models to meet the needs of consumers at lowest costs, now and in the future.

This work 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.

A key part of this work clears the way for energy users to participate directly in the wholesale electricity market to deliver lower-cost reliability. The Total Environment Centre (TEC) and Public Interest Advocacy Centre (PIAC) have committed in their submissions to submit a rule change request. 

Australia’s power system is in transition to a new mix of generation sources as more wind and solar power and demand response enters the market, while old generators are closing at the end of their economic lives. As the generation mix changes, the AEMC proposes to expand the regulatory framework to encourage efficient adoption of new technologies and demand response, supported by more transparent forecasting, to help deliver system reliability.

It’s essential that our regulatory framework  encourages the right amount of investment in the power system’s long-term capacity. These recommendations support a clear investment signals for the right generation to be built to support consumer needs. 

The final report recommends adoption of a new mechanism for consumers to offer demand response in the wholesale market, to be informed by AEMO and ARENA demand response trials. 

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. That’s why the Commission has recommended actions to remove barriers to demand response and give service providers additional tools to make it easier for consumers to choose to ‘power down’ in response to price signals from the wholesale market.

Recommended actions

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Recommended actions

  1. Improving the information available to the market so decisions made by market participants, the operator, regulators and policy makers are better-informed:
    • AEMO to consult on and prepare a new guideline to develop its forecasting methodologies.
    • AEMO to continuously provide forecast deviation data that can be used by industry to inform operational and investment decisions.
    • 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.

  2. Integrating demand into the wholesale market to support an active demand side. Facilitate increased demand response in the wholesale market through:
    • a wholesale demand response mechanism, supported and informed by demand response trials being undertaken by AEMO and ARENA.
    • a voluntary, short-term forward market that would allow trading of financial contracts closer to real time.
    • Subject to the outcomes of relevant trials, 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.

  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.
    • AEMO should consider extending the self-forecasting trial, currently available to semi-scheduled generators, to non-scheduled generators.
    • 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.
    • AEMO and the AEMC to consider what the future ramping needs of the NEM may be.

  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 the need for a strategic reserve to enhance or replace the RERT through the Enhancement to the Reliability and Emergency Reserve Trader rule change submitted by AEMO.
    • 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.
    • AEMO to increase transparency relating to intervention events and the resulting compensation payments.