Rule Change: Open


The Australian Energy Market Commission (AEMC) is considering options for the scheduling and provision of security services to ensure the power system remains secure in response to rule change requests from Hydro Tasmania and Delta Electricity.
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The Australian Energy Market Commission (AEMC) is considering options for the scheduling and provision of security 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 some ESS - 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, the Australian Energy Market Operator (AEMO) is increasingly intervening to direct generators to provide some services, to make sure the market is operated securely. 

The Operational security mechanism rule change process is considering options that would improve arrangements for maintaining security of the power system.  

The draft rule would introduce an operational tool to value, procure and schedule security services

The AEMC has released a more preferable draft rule that would establish an 'Operational Security mechanism' (OSM) to value, procure and schedule security services in the National Electricity Market (NEM) in the operational timeframe.  

The OSM would help move towards the long-term vision for managing power system security: 

  • more efficiently than directions (and other interventions) in the near-term
  • using explicit signals to encourage investment and operational decisions in the medium-term
  • by encouraging investment and innovation as our understanding improves in the long-term

Key elements of the OSM would include: 

  • procuring and scheduling “security services” which are those ESS not already procured through a market 
  • defining the security services to be procured through consultation and accrediting eligible participants 
  • procuring security services alongside the energy and frequency control ancillary services (FCAS) markets to get the best outcomes for consumers 
  • receiving offers close to real-time through multi-part bids  
  • putting in place specific arrangements to mitigate potential market power concerns 
  • enabling planning timeframe contracts, such as system strength, to be operationalised by the OSM 
  • providing transparency and governance arrangements to improve understanding of system security requirements 
  • not amending the current directions process but allowing it to return to a backstop arrangement   
  • using a design that would work alongside existing and proposed arrangements for providing system services 
  • commencing on 1 October 2025. 

Overview of the rule change process

Hydro Tasmania’s rule change request, received 19 November 2019, proposed an approach where system services would be procured within the spot market and the need for system services would be determined by binding constraints. This would involve the creation of a “synchronous services market” which would be integrated with the existing energy and FCAS spot markets. 

Delta Electricity’s rule change request, received on 4 June 2020, proposed an approach where system services would be scheduled ahead of time outside of the spot market. System needs would be identified through the short term project assessment of system adequacy.  

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. 

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 – 21 September 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, 25 August 2022
    • s108A report published giving reasoning for a rule not being made within a year of initiation – 17 June 2021
  • Final determination and rule expected completion – 27 July 2023 
    • s107 extension of time granted to publish final determination and rule (due to complexity and difficulty of issues raised by stakeholder submissions to draft determination) – 22 December 2022.
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