Wholesale Electricity Market reform work program Public Utilities - PowerPoint PPT Presentation

Wholesale Electricity Market reform work program Public Utilities Office / Australian Energy Market Operator Market Advisory Committee 13 June 2018

AGENDA FOR TODAY • Discussion on scope of initial reform packages • Discussion on MAC working groups • Outcomes of first WEM Reform Co-ordination Committee meeting • Next steps 2 Department of Treasury

WEM AND NETWORK REFORM PROGRAM – DESIGN RESPONSIBILITIES The diagram below sets out the initial allocation of responsibilities for leading design – overall responsibility for the Program reside with the PUO and ultimately the Minister for Energy. Network Access WEM Reform Program Program Market Power Reserve Capacity Security Constrained Market Power System & Dispatch System Security Mitigation Pricing Review PSSR Standards & Access Rights Registrations Constraints Frameworks Transitional Arrangements Roles & Spot Market Forecast & PASA (e.g. Compensation) Responsibilities Reserve Capacity STEM Outages Governance Mechanism (Certification) Settlements Dispatch & RTO Technical Rules KEY Prudentials PUO (Network) Synergy Transition PUO (WEM) Ancillary Services AEMO Market Information Western Power Cross-Project Change (e.g. Roles & Responsibilities, Compliance, Confidentiality, 3 Protected Provisions, Data Provision) Department of Treasury

WEM REFORM PROGRAM TRANCHES The diagram below provide a high level view of the WEM Reform program tranches. 2018 2019 2020 2021 2022 2023 Tranche 1 – Frameworks Deliver changes to underlying frameworks (e.g. reliability and frequency operating standards) and the associated regulatory/system modifications to allow assignment of Capacity Credits in a constrained environment Project 1 Project 2 Project ‘n’ Tranche 2 – Constrained Network Access & SCED Deliver regulatory, system and business changes to enable security constrained economic dispatch (SCED), including full facility bidding for Synergy; co-optimised energy and ancillary service markets and five minute dispatch Project 1 Project 2 Project ‘n’ Tranche 3 – Optimised Operations Deliver regulatory, system and business changes that provide additional benefits to system and/or market operations Project 1 4 Project 2 Department of Treasury Project ‘n’

MARKET AND DISPATCH ARRANGEMENTS/POWER SYSTEM SECURITY - SCOPE OF PROPOSED TRANCHES Tranche 1 – Frameworks (mid 2018 - 2020) Tranche 2 – Full SCED (by 2022) Project  ‘New’ RCM approach to enable assignment of Certification of Reserve capacity in a constrained access market Capacity *   Registrations Initial changes to improve current registration Potential further changes (if required) to amend the classes and framework (including removing barriers registration classes and framework to support for energy storage and revision of dispatchable constrained access arrangements loads construct)   Spot Market Move reference node to Southern Terminal (for Introduce new spot market with co-optimised planning purposes with activation date to align with energy and ancillary service dispatch on least-cost SCED go live date) methodology  Determine approach to, and responsibilities for, calculation of Marginal Loss Factors (MLFs)  Short Term Consequential changes to reflect broader SCED Energy Market changes (STEM)  Settlements Consequential (and not minor) changes proposed.  Prudential Consequential changes to reflect broader SCED arrangements changes  Synergy Full facility bidding and dispatch for Synergy Transition portfolio   Ancillary Model volume requirements for ancillary services in Introduce new ancillary services and (where Services constrained access market appropriate) markets for those services to meet  Consider introduction of new ancillary service(s) to requirements of new constrained access market support system operations in advance of SCED model (e.g. meeting new PSSR standards) (e.g. fast frequency response or inertia) 5 Department of Treasury * RCM changes form part of the Network Access Reform program

MARKET AND DISPATCH ARRANGEMENTS/POWER SYSTEM SECURITY - SCOPE OF PROPOSED TRANCHES Tranche 1 – Frameworks (mid 2018 - 2020) Tranche 2 – Full SCED (by 2022) Project   Power System Introduce new frameworks for security and Option to amend Lack-Of-Reserve and Low- Security & reliability, including design of the operating states Reserve conditions using statistically developed Reliability framework, management of contingency events, margins (PSSR) power system reliability, and draft system standards, settings and definitions, governance arrangements and roles and responsibilities   Constraints Introduce right, obligations and definitions to Develop the full constraint library and support the development of a new system normal mechanisms to publish constraint information to constraints library market  Develop a new system normal constraint library to facilitate Reserve Capacity certification; forecasting/planning; and outage management   Forecast & Improvements to forecast and PASA systems to Consequential changes to support full SCED PASA reflect move to constrained access model implementation (e.g. reflecting 5 min dispatch) and introduce publicised pre-dispatch information   Outage Introduce changes to frameworks that are Implement changes to power system and market operations to reflect ‘new’ constrained access Management consistent with and allow participants to start planning for a constrained dispatch environment arrangements for outage planning, notification, management and settlement  Dispatch Introduce 5-min dispatch with high degree of automation to lock-in/lock-out where non- compliance occurs. Integrate fast-start capabilities. 6 Department of Treasury

MAC WORKING GROUPS Power Systems Operations Market Design Working Group and Operations Working Group Role 1. Consider and advise on all matters 1. Consider and advise on design and related to power system operations in operation of the new spot market, the context of adopting SCED including providing advice on impacts to 2. Consider and advise on current and different market participant classes emerging challenges in power system 2. Advise on sequencing of work packages security and reliability and benefits from adopting specific reform 3. Advise on sequencing of work items early packages and benefits from adopting 3. Consider and assess Market Rule and specific reform items early procedure changes, and changes to other 4. Consider and assess market rule and regulatory instruments as required, to procedure changes, and changes to support transitioning to the new spot other regulatory instruments as market required, to support efficient operations 4. Be aware of and advise on of power system into the future interdependencies with other workstreams 5. Be aware of and advise on interdependencies with other workstreams Tenure Initial period of 12 months Initial period of 12 months Chair AEMO PUO Membership Open to industry Open to industry Secretariat AEMO PUO 7 Department of Treasury

WORKING GROUP MEMBERSHIP - PROPOSED SELECTION CRITERIA • Members will possess sufficient knowledge and expertise to discuss the subject matter • Members will be able to provide general sector-wide representation • Members will be available to provide continuity of participation • Members will be able to carry out impact analysis, etc if necessary 8 Department of Treasury

WORKING GROUP MEETING ADMINISTRATION • The Chairs will accept/decline nominations based on selection criteria • No more than two representatives from any one organisation in each Working Group • Record of main discussion items and actions will be maintained • Publication of meeting papers and record of actions etc to be maintained on Rule Change Panel website • PUO-AEMO will manage updates to MAC and WEMRCC 9 Department of Treasury

NEXT STEPS ON MAC WORKING GROUPS • Rule Change Panel Support team to circulate ToRs for Working Groups (once received from PUO) for out-of- session MAC approval • RCP Support team to administer nomination process for Working Groups, supported by PUO and AEMO • AEMO to establish Power System Operations Working Group by end June, supported by PUO • PUO to work with RCP Support team for publication of required information 10 Department of Treasury