Power outage risk from RERT: state govts
By Sophie Boot
Changes to the Reliability and Emergency Reserve Trader mechanism proposed by the Australian Energy Market Commission could increase the risk of power cuts in Victoria, the state government has warned.
The RERT - or Reliability and Emergency Reserve Trader - is a safety net whereby AEMO can contract large energy users to cut their power usage, or begin generation, when the network is stretched. Historically, it has been rarely used, with AEMO procuring supply just three times in total and never dispatching it before 2017.
However, the summer of 2017/2018 saw AEMO activate the RERT twice, costing consumers A$52 million, and it was used again during the most recent summer.
The draft rule change, released by the AEMC in February, involves a number of alterations to the existing RERT framework. Crucially, the new rule would expand ‘out-of-market provisions’ - where capacity cannot be contracted for the RERT if it has been in the market for the relevant trading interval. The change would mean capacity which had been available in the market in the past year would be prevented from being contracted under the RERT, whether it was available for the wholesale market or demand response.
In the Victorian government’s submission to the AEMC, Paul Murfitt, executive director of energy sector reform for Victoria’s Department of Environmental Land, Water and Planning, said this change would “limit an already scarce market” and might reduce otherwise-available RERT capacity, such as from retiring generators which may otherwise have been available during the peak summer period.
“This proposed exclusion is very concerning for Victoria as it would effectively disqualify some of the most significant potential RERT contributions and could in effect reduce the amount of reserves available for procurement in summer 2019-2020 by more than half (based on the nature of the 2018- 2019 RERT resources procured)”, Murfitt wrote.
“The Victorian Government is concerned that the draft rule determination will directly exacerbate the risks of outages to the Victorian community by preventing key resources from participating in RERT in summer 2019-20 and beyond.”
South Australia’s government was also concerned by the out-of-market provision. Vince Duffy, executive director of energy and technical regulation at the state’s Department for Energy and Mining, wrote that it “introduces a significant risk” to providing enough reserve capacity when needed at the most competitive price, by reducing the number of potential RERT providers.
“The Division reminds the AEMC that the RERT functions to provide reliability to the power system at lowest cost and reducing participants through the above restrictions results in poor outcomes for consumers through potentially increased RERT costs,” Duffy said.
Retailer Flow Power, which has participated in the RERT and offers demand response to its business customers, also submitted against the out-of-market change.
Flow’s managing director Matthew van der Linden said the change would make it more difficult for Flow to participate in the RERT, and the issue of gaming the market is “in my view relatively easily managed”.
“The biggest risk, we feel, is from anything that waters down demand response or doesn’t encourage it,” van der Linden said.
AEMO itself - which originally proposed enhancing the RERT - isn’t convinced by the AEMC’s proposal either. In its response to the draft rule, AEMO said it believes the whole rule change will in fact make the RERT less effective “by potentially reducing the supply pool as well as increasing the cost of RERT resources.” Among other issues, AEMO foresees problems with the limit on load availability.
“The new out-of-market provision will lead to less RERT resources being available and the decision against multi-year contracting means that not only will the pool of resources be smaller, the available resources might be offered at higher cost”, AEMO said.
Having received submissions on its draft rule, the AEMC must now publish its final determination on the RERT rule change by May 2nd.