Rule Change: Open

Overview

On 2 July 2020 the Australian Energy Market Commission (AEMC) initiated a rule change request from Infigen Energy seeking to introduce an operating reserve market in the national electricity market (NEM) to help respond to unexpected changes in supply and demand.
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On 2 July 2020 the Australian Energy Market Commission (AEMC) initiated a rule change request from Infigen Energy seeking to introduce an operating reserve market in the national electricity market (NEM) to help respond to unexpected changes in supply and demand. 

This project dovetails with the work of the Energy Security Board’s (ESB’s) post-2025 market design project, particular its workstream on essential system services and resource adequacy mechanisms market design initiative. 

This rule change request is also being considered as part of a wider Commission work program looking at new ways to deliver system services as the power system evolves. 

A consultation paper was published on 2 July 2020 seeking feedback on this, and other related rule change requests by 13 August 2020. 

A Directions Paper was released on 5 January 2021 relating to both this rule change request as well as a related rule change request proposing the introduction of ramping services (ERC0307) received from Delta Electricity. The paper: 

  • considers the ability of the current market frameworks to address variability and uncertainty in power system conditions, and
  • outlines high-level designs for four options to procure reserve services.

A technical working group meeting was held on 22 April 2021 to present and discuss modelling commissioned to provide insights into the potential for a reserve service to benefit consumers. 

A draft determination is due to be published by 9 December 2021.

Rule change request from Infigen Energy 

On 19 March 2020, the AEMC received a rule change request from Infigen Energy which seeks to amend the National Electricity Rules to introduce a dynamic operating reserve market to operate alongside the existing NEM spot and frequency control ancillary services (FCAS) markets. 

Infigen argues this mechanism will help AEMO manage new and emerging challenges in the power system, being driven by increased variability and unpredictability in power system operation. These trends are making it more difficult to forecast, schedule and balance generation and load in the NEM.

The proposed operating reserve market comprises a dispatchable, raise-only service procured similar to contingency FCAS services in real-time and co-optimised with the other energy market services. The proposal suggests reserves could be procured 30 minutes ahead of time (with a 15-minute call time) to align with the requirement to return the system to a secure operating state within 30 minutes.

Extensions

On  24 September 2020, the Commission extended the timeframe to make a draft determination until 24 June 2021. On 16 June 2021, the Commission again extended the timeframe to make a draft determination until 9 December 2021

The extension will allow the Commission sufficient time to develop and consult on whether or not it would promote the long-term interests of consumers to unbundle the provision of operating reserves from the energy market where they are currently implicitly provided, reflecting the complexity of the issues involved. 

The extension will also allow complex modelling to be undertaken and further technical advice to be provided by AEMO.

In addition, the extended timeframe also enables the Commission to undertake further consultation with stakeholders on the issues raised in the rule change request, including further technical working group sessions and bilateral engagement to work through the issues and solutions in detail with industry and consumer representatives.

The Commission also released the reasoning behind a rule not being made within a year of the initiation of the rule change request on 17 June 2021. This s108A report is provided below. 

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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