AEMO gets it RERT after rule maker does a backflip

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.

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.”