Improving Security Frameworks for the Energy Transition

Background

On March 28, 2024, the Australian Energy Market Commission (AEMC) finalised a determination and introduced a more favorable rule to improve market arrangements for security services. This response comes following rule change requests from Hydro Tasmania and Delta Electricity. The final rule represents a revised approach to the 'Operational Security Mechanism' (OSM) rule change for which a draft determination was released in September 2022. 

The final rule builds on existing tools and frameworks within the power system to enhance system security procurement frameworks. It addresses system security challenges during the transition by reducing reliance on directions and providing better incentives for participants to invest in providing system security in the longer-term. It also increases transparency on system security needs and understanding, and how AEMO plans to manage system security as we transition to a secure net-zero emissions power system.  

The AEMC’s revised approach will result in the:  

• alignment of the existing inertia and system strength frameworks (introducing a NEM-wide inertia floor, aligning procurement timeframes with the system strength framework, and removing restrictions on the procurement of synthetic inertia);
• removal of the exclusion to procuring inertia network services and system strength in the NSCAS framework;
• creation of a new transitional non-market ancillary services (NMAS) framework for AEMO to procure security services necessary for the energy transition;
• requirement for AEMO to enable (or ‘schedule’) security services across the whole NEM for a variety of service types; and 
• changing the directions reporting framework. 

The rule sets forth multiple implementation milestones, scheduled between June 30, 2024, and December 2, 2025. The Transitional Services Framework will commence after June 30, 2024, with contracts able to be procured following publication of the Transitional Services Guideline. Full Enablement Obligations Go-live is proposed for December 2, 2025.

High-Level Implementation Design (HLID)  

The purpose of the HLID is to provide an overview of how the ISF Rule will be implemented. This aims to assist affected participants in developing their own implementation timelines and impact assessments. AEMO intends to publish a high-level implementation design by June 2024.

Further information

For more information, please contact NEMReform@aemo.com.au.