This project is a desktop study of double-sided causer pays (DSCP) as a long-term incentive mechanism to improve frequency control.
This project undertook investigations into upgrading the system that promotes and pays for frequency control in the National Electricity Market (NEM).
Based on Frequency Deviation Pricing (FDP) concepts, the proposed system would complement and extend arrangements that mandate primary frequency control capability and reserve units for slower moving control. It would also replace the system for paying for regulation which has declined in effectiveness.
The arrangements examined and recommended by this project, if implemented, would reduce barriers to the entry of renewables by encouraging greater participation and competition in the provision of frequency control services.
Report: A Double-Sided Causer Pays Implementation of Frequency Deviation Pricing – Analysis Report
This report quantitatively examines some key issues identified in the Inception Report. It also presents and gives examples of a calculation methodology for a version of Double-Sided Causer Pays, a special implementation of Frequency Deviation Pricing.
Report: A Double-Sided Causer Pays Implementation of Frequency Deviation Pricing – Inception Report
This report sets out the objectives of the DSCP study as well as an overview of frequency control and its status in the NEM. It highlights the key issues to be evaluated and sets out a methodology and detailed work programme.
Report: A Double-Sided Causer Pays Implementation of Frequency Deviation Pricing – Control & Pricing Theory
This report aims to put the DSCP concept on a wider theoretical and practical foundation. It demonstrates the basis for DSCP’s efficiency, operational stability and consistency with related frequency control services.
DSCP is a theoretical market incentive, which means those causing the frequency instability pay those who are correcting the frequency stability.
Frequency control in the NEM has been deteriorating since 2005 with a marked decline in recent years. As a result of these ongoing issues, the Australian Energy Market Commission (AEMC) made a final rule determination in March 2020 which requires all registered and capable generators in the NEM to provide a form of mandatory primary frequency control. This includes renewable generation and causes some limitations on their energy output. This requirement will be in place until June 2023.
The renewables sector has advocated for the mandatory requirement to be replaced with a more flexible incentives-based arrangement, such as DSCP. This market-based approach could result in frequency regulation services being provided by a smaller number of generating units and batteries that are best placed to provide the service, thereby reducing the total costs of the service. These generating units and batteries will receive a value stream compensating for their ability to provide the service. The power system would then be less reliant on thermal generator governor responses and would more confidently operate with few thermal units online.
DSCP is considered a promising but potentially technically challenging approach to incentivising primary frequency control, requiring further analysis to demonstrate how it would operate in practice.
The Australian Energy Council will engage closely with key stakeholders, including the AEMC, the Australian Energy Market Operator (AEMO) and the Energy Security Board (ESB), on planning activities for the project and ongoing stakeholder engagement.
The Australian Energy Council will also deliver two stakeholder engagement workshops, which will facilitate the presentation of project findings to stakeholders and will seek input and recommendations that can be integrated into the analysis and improve the outcomes.
The Australian Energy Council’s key consultant, Intelligent Energy Systems, will deliver reports covering inception, control and pricing theory, primary frequency response performance analysis, and project summary and conclusions, which will include input from the stakeholder engagement workshops.
This reporting will provide insight into the suitability of a DSCP mechanism to manage frequency control and identify potential challenges in implementation. Sharing this knowledge will provide the AEMC with the necessary information to develop a frequency control regime beyond the life of current arrangements.
If the work is successful and the AEMC recommends the implementation of DSCP, then this will assist the secure transition into a renewables dominated system. It will permit, where cost effective, the harvesting of sun and wind without loss due to mandatory requirements to locally support frequency.