In the face of the rapid transformation being experienced in the electricity sector, the market systems, standards, obligations and frameworks that underpin the operation of the power system in the South West Interconnected System (SWIS) are under increasing pressure.
Unless we modernise the way the power system is regulated and managed, energy will not be dispatched at the least sustainable cost, the power system will be limited in its ability to accommodate growing levels of renewable generation and other new technologies (such as battery storage) while maintaining security and reliability, and signals for investment in the power system — at the right time and place — will be inadequate.
Some elements contributing to the Delivering the Future Power System work stream were progressed by the former Public Utilities Office, such as improvements to pricing and demand–side participation under the Reserve Capacity Mechanism, clarification regarding how energy storage can currently participate in the Wholesale Electricity Market, and foundational features of an improved spot market.
The Taskforce will build upon this work to deliver the Government’s Energy Transformation Strategy.
The Delivering the Future Power System work stream has two major elements: Power System Security and Reliability and Future Market Operations.
Power System Security and Reliability
This project stream focuses on ensuring that the regulatory frameworks, obligations placed on market participants, and tools available to the Australian Energy Market Operator (AEMO) are there to ensure that power system security and reliability is maintained – despite generation mix and customer demand changes.
New Essential System Services Framework: The way Essential System Services (often referred to as Ancillary Services) are currently designed and used will not meet the future need of the power system, which will be characterised by rapid fluctuations from intermittent generation and low daytime system load. New Essential System Services and effective means for their supply will be designed around the current and future needs of the power system.
Generator Performance Standards: Alongside the design of new Essential System Services, new Generator Performance Standards will be designed and implemented — in a staged fashion — to help maintain power system security and reliability as well as improve equity in how different technologies and new and legacy generators are treated.
Regulatory Architecture and Governance: The way in which regulatory frameworks and energy technologies have evolved has resulted in gaps, duplication, and inconsistency between the instruments which govern power system security and reliability. Roles and responsibilities between AEMO, Western Power and market participants will be clarified, and change management and governance arrangements will be improved.
Reliability Standards: Various reliability targets apply to different elements of planning and operating the South West Interconnected System. Consideration will be given to the creation of common reliability standards, their governance, and how standards are reflected throughout the regulatory framework.
Future Market Operations
This project stream focusses on major improvements to the design and operation of the Wholesale Electricity Market (WEM) to ensure that electricity is dispatched at the lowest sustainable cost and the operation of the market efficiently reflects and facilitates improvements to the way Western Power’s network is accessed.
Security Constrained Economic Dispatch: The dispatch of generators around network constraints in the WEM is currently managed through manual systems and processes. With the complexity of managing the power system increasing, this is leading to inefficiencies in the market. Dispatch is also not currently co–optimised across energy and Essential System Services markets, resulting in increased costs for customers. Coupled with other improvements to the market, a ‘security-constrained’ market design with co–optimised dispatch across energy and any Essential System Services markets will automatically factor in network and security constraints when determining dispatch, ensuring that the dispatch outcomes are the lowest cost available while maintaining system security.
Synergy Facility Bidding: Synergy currently bids its generation into the market as a portfolio, rather than individual facilities, and is dispatched on that basis. The adoption of a security–constrained market design requires individual facility bidding and dispatch to ensure the system operator can manage when network and security limitations are reached at various locations on the network. Synergy will be required to participate on an individual facility basis to enable the proper functioning of the new security constrained market. An appropriate approach to facility bidding for Synergy will be developed, balancing the need for improved price transparency and better constraint management with the costs of implementation.
Reserve Capacity Mechanism under Constrained Access: The implementation of a framework for constrained access of Western Power’s network will require changes to the way capacity credits are assigned under the Reserve Capacity Mechanism to ensure it continues to incentivise investment in capacity while providing locational signals to new facilities. This element of Future Power System is being managed as part of Improving Access to the SWIS workstream, in conjunction with the Future Market Operations work stream.
Controls for efficient market outcomes: Throughout the Delivering the Future Power System work stream, consideration will be given to the extent to which market design changes confer market power on individual or groups of market participants which can potentially be exploited to affect market outcomes. Scenarios where controls for efficient market outcomes may be required include rules for rebidding after gate closure, definition of short run marginal cost and situations where a market participant may have market power.
Publications and Consultation
Information papers released by and submissions received in response are available here.
Additional information about consultation, including Transformation Design and Operation Working Group (TDOWG) material, is available here.
Following consultation, the Energy Transformation Taskforce will make decisions on elements of market and regulatory design. These decisions will form the basis for draft market rules and regulations.