Rule Change: Open

Overview

The Commission has published a directions paper on options for the scheduling and provision of essential system services to ensure the power system remains secure in response to rule change requests from Delta Electricity and Hydro Tasmania.
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The Commission has published a directions paper on options for the scheduling and provision of essential system services to ensure the power system remains secure in response to rule change requests from Delta Electricity and Hydro Tasmania. 

Essential system services are critical to maintaining overall power system security and reliability by meeting core power system requirements. However, current market arrangements do not appropriately value the provision of all these - in part because most of these services were historically were provided in abundance as a by-product from energy. Given the current transition to a new operating environment with exiting synchronous generation, AEMO are increasingly intervening to direct generators on to provide essential system services in order to make sure that the market is operated securely.

Through both rule change proposals, the Commission is considering options to evolve the existing market design to deliver secure outcomes efficiently. The focus of these rule changes is considering solutions to better procure, coordinate and optimise provision of essential system security services, that are not already provided through other means. 

Submissions to the directions paper will close on 21 October 2021. This paper has been published ahead of a draft determination for this rule change, currently to be published on 16 December 2021

Directions paper

The NEM’s transition away from ageing thermal synchronous fleets, which the power system was designed around, toward one with increasing amounts of renewables and batteries, is pressing the limits of current system security and operational experience. While these synchronous generators supply essential system services as a by-product of energy, the transition means the current implicit provision of these services can no longer be relied on to maintain power system security. Without a means of explicitly valuing and procuring system services essential for security, AEMO must intervene for their provision – resulting in inefficient market outcomes. 

The Commission has proposed two broad approaches to address this issue. Both options look to efficiently schedule resources to ensure the power system remains secure and consumer costs are minimised: 

  • Market ancillary services (MAS) approach: Where the procurement of system services would be brought into the pre-dispatch engine to explicitly value and procure other system services in addition to energy and FCAS.
  • Non-market ancillary services (NMAS) approach: Where the procurement of system services would be undertaken through of structured contracts, instead of AEMO directions, which would then be scheduled through an explicit optimisation approach.

These approaches both reflect the solutions proposed in the rule changes themselves, as well as the unit commitment for security (UCS) and synchronous services mechanism (SSM) that was proposed by the ESB in its post-2025 market design work. The Commission has an initial preference for the NMAS approach. 

Stakeholders are invited comment on these approaches through submissions to the directions paper by 21 October 2021

The Commission will hold a webinar briefing on the rule changes on Monday, 20 September 2021. Stakeholders can register here.

Rule change request 

On 4 June 2020, the AEMC received a rule change request from Delta Electricity which seeks to amend the National Electricity Rules to introduce an ex-ante, day ahead capacity commitment mechanism and payment so that generators or demand response providers remain available to offer operational reserve and any other system security or reliability services that the Australian Energy Market Operator (AEMO) may require to meet its security and reliability objectives.

Delta Electricity argues that non-peaking dispatchable plant, which is necessary for meeting the energy and system services needs at this time, may decommit in response to increasing periods of low prices. Delta Electricity argues this will lead to the national electricity market (NEM) more frequently experiencing shortfalls in system security and reliability services and an increasing reliance on AEMO directions to meet power system needs.

The proposed capacity commitment mechanism would provide a payment to non-peaking dispatchable generators to remain online at their minimum safe operating level (MSOL) should they be needed for system security or reliability purposes based on AEMO forecasts during the pre-dispatch process.

The Delta Electricity (ERC0306) rule change has received three extensions under s.107 of the NEL. On 17 June 2021, the Commission further extended the timeframe to make a draft determination until 16 December 2021. The Commission has also released the reasoning behind a rule not being made within a year of the initiation of the request on 17 June 2021. This s108A notice is provided below. 

Other relevant system services rule change processes underway 

Other relevant system services rule change and market design processes underway 
These rule changes form part of the AEMC’s system security work program, which complements and is interdependent with the Energy Security Board (ESB)’s advice on a long-term, fit-for-purpose market framework to support reliability that from the mid-2020's. The AEMC is working closely with the ESB and the other market bodies as it progresses these rule change requests.  

 

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