AEMO gets it RERT after rule maker does a backflip

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Energy market rule-maker reinstates long dated emergency reserve, just months after it had dumped it.

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The Australian Energy Market Operator has succeeded in re-instating a strategic reserve that it says is crucial to ensure the lights stay on, forcing the marker rule-maker to reverse a decision that came into effect late last year, and over the objections of big utilities.

The Australian Energy Market Commission said on Thursday that it had made a final rule to allow AEMO to tap strategic reserves nine months ahead of a projected shortfall, under what is called the reliability and emergency reserve trader (RERT) framework.

The rule change – or reintroduction, technically, of the long-notice RERT – was requested by AEMO in March, and fast-tracked by the traditionally glacial-paced AEMC to be put to use from July 13, well in advance of Australia’s next summer.

The reintroduction of the rule – just two years after AEMC decided to scrap it, and seven months after that decision came into effect – can be notched up as a win to AEMO, which is keen to properly explore the potential of coordinated demand response to fill supply gaps and smooth price spikes.

But market analysts say it could also be interpreted as yet another sign that the market is not working.

The initial reasoning behind removing the long notice RERT was to do with what the AEMC described as the “distortionary impacts” of the mechanism, and the time-frame was reduced from 9 month to 10 weeks to allow for “a market response.”
AEMO clearly thinks that is not happening – it sought a longer dated RERT to help navigate last summer – thought to be the trickiest summer because of the closure of Hazelwood and the lack of new wind and solar which remained in the pipeline.
It then sought to have the longer-dated RERT reinstated, along with other market mechanisms such as a “day ahead” market, which will combine with the reliability obligation in the National Energy Guarantee, and its own Integrated System Plan.
The AEMC justified its about-face on the “changing generation mix” and the success of the ARENA-AEMO RERT trial, which had demonstrated the existence of resources, primarily demand response, capable of participating in the RERT.

As we reported here, the mechanism – which is currently able to procure out-of-market reserves 10 weeks ahead of a projected shortfall – was used only twice over the 2017-18 summer, but to great effect.

Not only did the lights stay on throughout the nation’s second-hottest summer on record, but AEMO has reported that it cost just an extra $6 per customer for the 2GW of capacity that ensured there were no blackouts or load-shedding events.

“When it came right down to it, the cost of getting the reserves …. was $6 for the year, for consumers,” AEMO chief executive Zibelman told RenewEconomy in May.

“Basically two cups of coffee is what allowed us to make sure no matter what the weather condition was, we were in good shape and going to get through OK.”

But it is not just about keeping the lights on. Using this kind of resource is also expected to make the entire electricity system work more efficiently, in terms of both kW and dollars – a fact even the AEMC is now prepared to concede.

For AEMO to contract for generation or demand response capacity nine months in advance of a projected shortfall would give the market operator more options to choose from, the AEMC said in its notice of reinstatement.

“This may improve the efficiency of the procurement process and put downward pressure on costs.”

For Zibelman, rule change is just one of many that will be required if the market operators is to make the most out of Australia’s huge distributed solar generation resource, and (soon) battery storage.

It will also increase the market operator’s scope to call on demand management, rather than building expensive new “baseload” or peaking generation that might only be used for a few hours a year.

“We’re happy we got through the summer without major incidents,” she said, pointing to the planning, training and extra reserve that had given AEMO “quiet confidence” that it would.

But the more time for planning, and the more access to reserves, the better, as more coal plant closes, more renewable energy comes on line, and weather becomes more extreme and less predictable.

“We continue to see more and more hot days, more and more heat-waves over multiple days, and more and more hot weather over multiple regions,” Zibelman told a conference in May.

“We need a reserve to deal with fact that we may have another really hot day, and a generator out. The last thing we want to do is tell people there is no electricity supply when the temperature reaches 40°C,or 42°C, or 47°C as we had in New south Wales last summer.”

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20 Comments
  1. Shilo 1 year ago

    The thing that worry’s me, is that, this is actually having to be put back as a rule.
    I would have thought common sense 100 years ago would have been pasted down through the years.
    There again Brisbane’s dam had to release water during a flood to stop it from overflowing because the dams use changed over the years from a flood mitigation dam to a water supply dam, in the minds of the people running it.

    • Catprog 1 year ago

      Probably due to the drought before hand.

    • Jon Albiez 1 year ago

      No, it was the sheer volume of water coming down the catchment. Wivenhoe has always been a dual purpose supply and mitigation dam. The alternative was the fuse plugs blowing on the auxillary spillway and causing an even greater disaster downstream.

      Remember the primary aim of operating a dam is to protect structural integrity.

      • Shilo 1 year ago

        Hmmmmmm. Yes and building that type of dam above a population, well thats another story.
        I dont belieive the fuse plug was part of the original dam, I am pretty sure it was added much later. So maybe they worked out the primary aim of the dam after they built it?.

        • Jon Albiez 1 year ago

          They couldn’t exactly build it below either. Problem with coastal cities.

          The auxiliary spillway was constructed after the initial project, as part of the mass upgrade of dams nationwide to meet new safety standards. Somerset has just undergone the same process. Nothing to do with changing the role of the reservoir, merely responding to improved knowledge to increase safety.

          • Shilo 1 year ago

            That will be like the operations manual after the dam flooded brisbane, it will also be new and improved.
            Its one thing to build a dam, or let me say the correct dam for the location.
            My point is the dam built was a flood mitigation dam, you say it was a duel dam.
            Once it because a duel dam, it become the wrong build or type of dam, for above a city, and as you pointed out a fuse plug had to be added to it then, to soften the full impact on brisbane. (In case they ran it too full)
            Trying to do two things creates the wrong outcome, hence 2011.
            I would also suspect, down the track another. History has a habbit of repeating its self. Esspically when you stack the odds against your self

          • Tony Wilson 1 year ago

            Bahh. The cause of the houses getting flooded wasn’t the type of dam, and it wasn’t the way it was operated, and it wasn’t even the massive rainfall. It was building houses where Blind Freddie knew they would get washed away sooner or later. Rank stupidity of the first order. Or corruption. Or probably both.

          • Shilo 1 year ago

            Yes a very vaild point.
            But lets really rank stupid.
            Building a dam above that, so when people make mistakes, such as allowing the dam to top!!!!!!. The end result is heaps worse than with no dam at all. Because if that dam tops as it almost did, places are going to flood that could never flood.
            Stacking the odds not in your favour is simply silly.
            If the whole operation of the dam is not able to be run by monkeys, the chances of it at some time having serious problems, are better than odds on.

          • Warwick Sands 1 year ago

            Yes all those pesky people who want to be able to have baths, flush toilets and cups of coffee.

          • Shilo 1 year ago

            In 2007/2008, according to all the xperts, we were never going to see rain again, it was going to get less and less. People were on water rations. All states built desal plants for a total cost of over 15 billion dollars. NONE are operating. Its been raining!!!!!!!!!.
            The point is this.
            Humans do crazy things, thinking they know, brisbane is in a flood path, the system of humans let people build in the flood path, they got flooded. The humans build a dam, to stop brisbane flooding!!!!!!!!!!. A dam!!!!!!. they believe simply a dam will stop it. Not even for one moment thinking, hang on what happens if this dam fails!!!!!!. In fact they build the dam bigger, in fact 3 times bigger to make it not only stop floods but to also supply water for a increase in population.!!!!!!.Once again thinking, no way can this fail, we can build anything.
            In so stacking the odds well and truly in favour of a serious flood.
            So they have had a minor flood due to the new duel enlarged dam, but have created a huge risk of a flood nature could never produce.
            The bigger the dam above people the bigger the problem, and having the type of dam they have above brisbane, is even more crazy.
            AMAZINGLY smart.

  2. Chris Fraser 1 year ago

    I’m happy to pay AEMO $6 every year to manage this system. True, I didn’t care that much about the coffee.

    • Andy Saunders 1 year ago

      Actually that would not be Sydney coffee. Hard to get $3 coffee here…

      • Joe 1 year ago

        Is Maccas still doing the $1 jobs?

        • Andy Saunders 1 year ago

          Probably. But I’m not sure that counts as coffee.

          • Joe 1 year ago

            You’re right but plenty like/d the ‘brown water with milk & sugar’ for a lazy $1

  3. Jon 1 year ago

    Last year AEMO wanted to install about 200MW of gas/diesel fired generators for the RERT but they ran out of time. Now they have more time, let’s see how they use it? I suspect that if it comes down to generation vs demand response that they’ll take the generation!

    • Paul Surguy 1 year ago

      There are 9 turbines,5 north and 4 south of Adelaide plus in the old power station in Victoria on the old bricket site as standby power in case a coal fire power station sneezes on it`s coal dust I think there are 20 units there no shortage of power

  4. Peter F 1 year ago

    If we got through last summer and we will have about 3 GW of new wind and solar on the grid and 1.5-1.8 GW of new rooftop solar, and AGL’s upgrade of Torrens Island on -line things should be pretty safe next summer

    • Rod Hardagain 1 year ago

      3GW of Wind or 1.8GW of solar is not the same as 3GW or 1.8GW of conventional generation.

  5. Ray Miller 1 year ago

    Now the AEMC has proven it can implement rule changes in months, how about bringing forward the 5 minute trading system for this summer?
    Before anyone comments I appreciate the data collection and computer systems need to be updated, but if Elon can install the largest grid battery in the world months why not?

    Or is Australian engineering and management not up to the challenge?

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