Incentives proposed to maintain power system frequency in Australia

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The Australian Energy Market Commission (AEMC) has drafted measures for generators to support system frequency control.

Among these is the introduction of incentives, through frequency performance payments, for market participants to operate their plant in a way that helps to control power system frequency.

Other elements of the rule include a confirmation that mandatory primary frequency response is a requirement going forward with all scheduled and semi-scheduled generators required to provide it.

Another is new reporting requirements from the energy market operator (AEMO) and regulator (AER) on the levels of aggregate frequency responsiveness in the power system and the costs of frequency performance payments.

“As the energy system decarbonises, we need to find new ways to provide essential services like frequency, voltage control and inertia,” says AEMC Chair Anna Collyer.

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“Doing this well will see clean energy integrated into the grid more quickly, effectively and safely.”

The ability to provide frequency response to keep the grid stable is becoming a valuable service as thermal generators start to exit and the system increasingly relies on weather-driven power generation sources such as wind and solar, as well as batteries.

The proposals include providing a clearer link between price signals and plant behaviour that impacts power system frequency, with the introduction of frequency performance payments to be made to participants that reduce the need for regulation service and separate treatment of costs and payments for the regulating raise and regulating lower services.

They also include a scaling of frequency performance payments and cost allocations, with a payment premium for positive contributions when more regulation frequency control is required than the AEMO enabled and allocation of costs for regulation services that are enabled and used to market participants who contributed to the need for those services.

The rationale for these is that when AEMO requires more regulation frequency control than it enabled, there is greater value for market participants who reduce the need for these services. This should be reflected in the frequency performance payments. Furthermore, market participants with negative contributions should face the proportional cost of their actions.

The AEMC envisages that the proposed measures should drive down the cost of frequency control services over time through increased efficiencies.

The draft rule, which is out for consultation, follows a ruling in March 2020 to place a mandatory obligation on generators to help control system frequency by responding automatically when it changes.

They also follow the introduction earlier this year of new fast frequency response markets to reward fast responders like batteries, aggregators, wind, solar and demand management services that can respond to frequency requirements within two seconds.