Rule Change: Open

Overview

The Commission is considering options for the scheduling and provision of essential system services to ensure the power system remains secure, in response to rule change requests from Hydro Tasmania and Delta Electricity.
View more

The Commission is considering options for the scheduling and provision of essential system services to ensure the power system remains secure, in response to rule change requests from Hydro Tasmania and Delta Electricity. 

Essential system services (ESS) are critical to maintaining overall power system security 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 provided in abundance as a by-product from synchronous generators such as coal and gas. Given the current transition to a new operating environment with exiting synchronous generation and increasing penetration of inverter-based resources such as wind, solar and batteries, AEMO is increasingly intervening to direct generators to provide essential system services, to make sure that the market is operated securely.

In the Operational security mechanism rule change process, 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.

This rule change process (ERC0290) is considering both Delta Electricity’s Capacity commitment mechanism for system security and reliability and Hydro Tasmania’s Synchronous services market rule change requests. The rule change requests were consolidated on 2 February 2022, pursuant to section 93 of the NEL, given that they both seek to address the same issue of the provision of ESS as the proportion of variable renewable energy (VRE) increases.

The AEMC plans to publish a consolidated draft determination on 25 August 2022, taking into account stakeholder submissions to the directions paper and consultation paper (see below). 

Directions Paper and System Services consultation paper

These rule changes were initiated through the publication of a consultation paper on 2 July 2020. Submissions to the consultation paper can be found below.

In a directions paper published on 9 September 2021, the Commission proposed two broad approaches to address the issues discussed above. Both approaches 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 set out it has an initial preference for the NMAS approach. Submissions to this paper can be found below.

Overview of the rule change process

The Hydro Tasmania rule change request

On 19 November 2019, Hydro Tasmania submitted a rule change request to amend the NER to create a market for “synchronous services", such as inertia, voltage control and fault level/system strength.

Hydro Tasmania proposed to address the shortage of “inertia and related services” in the national electricity market (NEM) by integrating the dispatch of a “synchronous services” with the existing energy and FCAS spot markets. This would involve changing the formulation of the constraints that are applied to the NEM dispatch engine (NEMDE).

The Delta Electricity rule change request

On 4 June 2020, the AEMC received a rule change request from Delta Electricity which seeks to amend the NER 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

Consolidation of the rule change requests

The Hydro Tasmania and Delta Electricity rule change requests were consolidated on 2 February 2022, pursuant to section 93 of the NEL, under the name “Operational security mechanism” (ERC0290). The AEMC decided to consolidate its consideration of the rule change requests because both identify the need for new arrangements to schedule and procure essential system services as the proportion of variable renewable energy (VRE) increases.

Background information and documentation for the Delta Electricity rule change request can be found here

Key dates for this rule change 

  • Rule change request received (ERC0290) – 19 November 2019
  • Rule change request received (ERC0306) – 2 July 2020
  • Consultation paper published – 17 July 2020
    • Submissions due 13 August 2020 – see below
  • Directions paper published – 9 September 2021
    • Submissions due – 21 October 2021 – see below
  • Rule change requests consolidated pursuant to s93 of the NEL – 2 February 2022
  • Draft determination and rule due – 25 August 2022
    • s107 extension of time granted to publish draft determination and rule (due to complexity of issues) – 24 September 2020, 9 March 2021, 17 June 2021, 24 November 2021, 22 June 2022
    • s108A report published giving reasoning for a rule not being made within a year of initiation – 17 June 2021

On 23 June 2022 the AEMC extended the date for publication of a draft determination until 25 August 2022 under s. 107 of the NEL, due to the complexity and difficulty of the issues identified by the Commission and raised by stakeholders in submissions to the directions paper. 

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 seeks to progress the Energy Security Board (ESB)’s recommendations on essential system services.  The AEMC is working closely with the ESB and the other market bodies as it progresses these rule change requests.  
 

View less

Documentation