AEMC proposes to reject bid for greater market control over small generators

The Australian Energy Market Commission has knocked back a proposal that would have centralised the operation of medium-scale generators, forcing them to participate in the energy market alongside large-scale power stations.

In a draft determination on a rule change request, the AEMC said that it would not impose new ‘scheduling’ requirements on medium-scale generators, that would have predominantly applied to commercial scale solar projects.

The Australian Energy Council, which advocates on behalf of major energy market incumbents, had requested the change to the national electricity rules, that would have required generators between 5MW and 30MW in size to act as “scheduled” generators in the energy market.

Energy market operators distinguish between “scheduled” generators, which are required to control their output as directed, and in accordance with market needs – mostly being made up of larger thermal coal and gas generators – and those that are “semi-scheduled” or “non-scheduled,” being predominantly wind and solar projects, which generate electricity in accordance with their resource availability.

Currently, only generators above 30MW are required to participate in the scheduling process, with participation being optional for generators between 5MW and 30MW.

The Australian Energy Council had argued that it was necessary to include generators above 5MW in size in the market scheduling process, saying that the growing number of installations of that size, and the proportion of electricity being supplied by small generators, would make it difficult for market operators to maintain stable supplies if they were to remain as non-scheduled.

The rule change would have compelled smaller generators, many of which would be medium-scale solar farms, to register and participate in National Electricity Market, including the central dispatching process for electricity generators, with system operators exerting more control over their operation.

The proposed new rules had been met with strong opposition from advocates of the clean energy sector, saying that the burdens that would be imposed on smaller generators through the need to participate as scheduled generators could make any such project of that size unviable.

The requested rule change had been characterised as an attempt by the bigger energy companies to prevent the entry of new smaller players, and a disproportionate burden on smaller projects to manage their output in the same way as a large power station does.

The AEMC modelled the potential costs of registering and operating a medium-scale renewable energy project as a scheduled generator, estimating that the initial cost to register would fall between $1.3 and 1.8 million, along with annual ongoing costs of between $150,000 and $550,000.

Imposing costs of this scale on a solar or wind project of just 5MW would effectively render any such project financially unviable.

The AEMC said that because the non-scheduled generators still represented a small portion of overall electricity supplies, the proposed new rules could not be justified.

AEMC chair Anna Collyer said that surging installations of small-scale rooftop solar installations were posing a more significant challenge for the energy market, and that the commission was already focused on how to best respond to integrating such systems into the grid.

“The Commission is already looking at better ways to integrate small-scale solar on the distribution network so that we can get the grid future ready – we’re dealing with that important issue through our distributed energy access and pricing reforms,” Collyer said.

“When it comes to the transmission network, there will be another avenue for dealing with any potential impact of larger numbers of small generators in the future. Work is under way as part of the Energy Security Board’s (ESB’s) post 2025 market reforms to consider a voluntary ‘scheduled lite’ model for smaller generators. This, combined with work on creating a two-sided energy market will be valuable tools for AEMO’s management of non-scheduled generators.”

The AEMC will consult on the draft determination and will accept submissions through to mid-August before issuing a final determination later in the year.

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