Rule Change: Open

Overview

On 22 April 2021, the Commission published a draft determination and a draft rule to introduce two new market ancillary services to help control system frequency and keep the future electricity system secure. The new services will foster innovation in faster responding technologies and deliver lower costs for consumers.
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On 22 April 2021, the Commission published a draft determination and a draft rule to introduce two new market ancillary services to help control system frequency and keep the future electricity system secure. The new services will foster innovation in faster responding technologies and deliver lower costs for consumers.

Stable frequency is an important part of maintaining a secure power system. Frequency varies whenever electricity supply does not exactly match consumer demand and uncontrolled changes in frequency can cause blackouts.

The new markets for Fast frequency response (FFR) would operate similar to the existing market arrangements for Frequency control ancillary services.

The introduction of FFR services, which operate more rapidly than the existing frequency control services, would provide an additional frequency control option thereby reducing the overall costs of managing power system frequency relative to the status quo or other alternative arrangements. 

Further information and background on FFR is available here.

Draft determination

The Commission’s draft rule is consistent with the rule proposed by Infigen in its rule change request. The draft rule introduces two new market ancillary service categories into the NER for:

  • the very fast raise service
  • the very fast lower service

The market arrangements for the new market ancillary services would be the same as those for the existing fast raise and fast lower services. This includes the arrangements for registration, scheduling, dispatch, pricing, settlement, and cost allocation.

The implementation and transitional arrangements under the draft rule include:

  • That AEMO revise the market ancillary services specification (MASS) within 18 months of the date that the rule is made, to specify the detailed description and performance parameters for the very fast raise service and the very fast lower service.
  • That the FFR market ancillary service arrangements commence 3 years from the date that the rule is made.

These time-frames may be bought forward as a result of further planning associated with the ESB post-2025 work program and stakeholder feedback on the FFR draft rule.

The Commission invites submissions on this draft rule determination, including the draft rule, by 3 June 2021.

Directions paper

On 17 December 2020, the Commission published a directions paper for two rule change requests that relate to the arrangements for fast frequency response and primary frequency response in the NEM.

Further information on the Primary frequency response incentive arrangements rule change is available at the project page

Submissions to the Directions paper closed on 4 February 2021. The Commission received 29 submissions through this stage of consultation.

The directions paper noted that as the power system transitions to a lower emissions' generation mix, there are emerging challenges for power system operation. One element of this technological change is the projected decrease in power system inertia. 

The projected decline in system inertia may lead to significant cost increases for ancillary services used to control system frequency. The provision of faster frequency response services is expected to mitigate the size of future cost increases for market ancillary services compared to a ‘do nothing’ approach. 

The high-level market options for the provision of contingency FFR services are: 

  • Option 1 – new market ancillary services to procure FFR FCAS
  • Option 2 – reconfiguration of the FCAS arrangements to procure FFR through the existing service classifications.

The Commission sought stakeholder views on these high-level FFR options along with a number of other policy considerations discussed in the directions paper.

Initiation

On 2 July 2020, the Commission published a consultation paper to commence the rule making process and consultation for this rule change request, Fast frequency response market ancillary service. The consultation paper also covered six other rule change requests that relate to the provision of system security services in the NEM.

Submissions to the consultation paper closed on 13 August 2020. The Commission received 43 submissions as part of this stage of consultation.

Extension of time

On 24 September 2020, the Commission extended the timeframe to make a draft determination until 22 April 2021. The extended timeframe is needed so AEMO can develop supporting technical advice through its frequency work plan in stage 2 of its Renewable Integration Study. AEMO’s advice, expected in February 2021, will inform the Commission’s draft decision and any design choice in relation to fast frequency response services or markets

Other relevant system services rule change processes underway 

The AEMC has seven rule change requests relating to the provision of system services that it is currently assessing.  Collectively, the AEMC refers to these rule requests as the “system services” rule change requests.  

These system services rule change requests complement and are interdependent with the work of the Energy Security Board (ESB) to develop advice on a long-term, fit-for-purpose market framework to support reliability that could apply 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.  

We are considering the interactions between issues raised in the different rule changes so that any new frameworks developed in response to the rule change requests will be focused on delivering the most efficient outcomes for consumers.   

The AEMC will be making draft determinations for each of the rule change requests over the coming year prioritising more urgent system security issues while continuing to coordinate with ESB work and seek key technical input from the Australian Energy Market Operator (AEMO).  

More information on each of the system services rule changes can be found at the links below: 

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Documentation