Reserve Capacity security

A Market Participant when assigned Certified Reserve Capacity (CRC) must ensure AEMO holds the benefit of a Reserve Capacity Security for the following

• New Facilities that are yet to enter service.
• Existing Facilities that are yet to re-enter service after significant maintenance or have a planned Facility upgrade.
• Demand Side Programmes (DSP) with assigned CRC.

Reserve Capacity Security can be in the form of a guarantee, bank undertaking or security deposit and is set at 25% of the Peak Benchmark Reserve Capacity Price multiplied by the number of Peak Capacity Credits assigned.

AEMO will return the Reserve Capacity Security to the Market Participant as soon as practicable after the end of the relevant Capacity Year, but no later than 30 November of Year 4 of the relevant Reserve Capacity Cycle, providing the Facility:

• operates at a level equivalent to 90% of its Required Level in at least two Trading Intervals; or
•  provides a report from an independent expert (under clause 4.13.10C of the WEM Rules), confirming the Facility can operate at a level at least equivalent to its 90% of its Required Level; and
• is considered in Commercial Operation by AEMO (as defined by clause 4.13.10B of the WEM Rules).

Should the Facility fail to operate in accordance with these requirements before the end of the relevant Capacity Year then the Market Participant must pay to AEMO, as compensation to the market, an amount equal to the Reserve Capacity Security for that Facility as soon as practicable after the end of the relevant Capacity Year, but no later than 30 November of Year 4 of the relevant Reserve Capacity Cycle.

This compensation is firstly offset against the cost of funding Supplementary Capacity Contracts for any capacity shortage and secondly as a rebate payment to Market Participants.

Where AEMO holds the benefit of DSP Reserve Capacity Security, a Market Participant may request the Reserve Capacity Security be released or waived. In making a determination, AEMO will consider the following:

• the size and types of Loads associated with the DSP.
• the historical performance, including any Reserve Capacity Tests or Verification Tests and.
• Other relevant matters.

DSP Reserve Capacity Security can be rolled over for future consecutive Reserve Capacity Cycles and respective Capacity Years, with amount adjustments as needed.

Failure to provide Reserve Capacity Security or DSP Reserve Capacity Security in the correct amount, designated form, and by the due date will result in the CRC assigned to that Facility lapsing.

For more information about Reserve Capacity Security, please refer to sections 4.13 and 4.13A of the WEM Rules, and the WEM Procedure: Reserve Capacity Security. Bank Guarantee and Security Deposit information can be found on the Credit support and reserve capacity security  webpage.