Rule Change: Completed
On 8 November 2018 the Commission made a final rule that requires large electricity generators to provide at least three years’ notice to the market before closing. This information will help market participants respond to possible future shortfalls in electricity generation, for example by building replacement capacity. The rule is based on one of the recommendations in the Finkel Panel review.
The final rule promotes reliability in the national electricity market by requiring generators to advise the Australian Energy Market Operator (AEMO) of the expected closure year for all their scheduled and semi-scheduled generation units. It also requires generators to give AEMO at least three years' notice of their intention to permanently close a generating unit unless they are granted an exemption by the AER. The provision of this information to the market will assist in managing the market impacts of the retirement of coal-fired generators as they reach the end of their economic lives.
AEMO must maintain an up-to-date list of expected closure dates for generating units on its website. AEMO must also consider and include information about generator exits as part of its annual long-term forecast process, the Electricity Statement of Opportunities (ESOO).
The Commission has recommended new civil penalties, enforced by the Australian Energy Regulator (AER), if generators fail to comply with the new obligations.
The rule also provides the Reliability Panel with discretion to identify specific energy constraint scenarios to be included for study for the purposes of preparing the Energy Adequacy Assessment Projection (EAAP). This will broaden the nature of input AEMO receives in considering possible energy constraint scenarios and their impact on generation adequacy.
To support implementation of the new rule, the AER will be required to develop a guideline by 31 August 2019, specifying how generators should provide information about closures to AEMO and when exemptions may apply. In the meantime, generators can voluntarily provide information about closures to AEMO.
The rule change request from Dr Kerry Schott AO, Chair of the Energy Security Board, is based on one of the recommendations of the Independent Review into the Future Security of the National Electricity Market. The Finkel Review identified managing the retirement of the existing coal-fired generators as they reach their end of life as a key challenge facing the national electricity market.
The Finkel Review recommended a policy package to achieve an orderly transition to a low emissions future. Part of this policy package was putting in place notice of closure requirements for large generators.
The AEMC published a consultation paper for this rule change request on 10 May 2018. This was followed by a draft determination and draft rule published on 16 August 2018. Submissions can be found below.