Reserve Capacity Security

A Market Participant when assigned Certified Reserve Capacity (CRC) must ensure AEMO holds the benefit of a Reserve Capacity Security (RCS) for the following:

• new Facilities that are yet to enter service;
• existing Facilities that are yet to re-enter service following significant maintenance or have a planned Facility upgrade; and
• Demand Side Programmes (DSP’s) with assigned CRC.

The Provision of RCS and DSP RCS

RCS and DSP RCS can be in the form of a guarantee, bank undertaking or security deposit. The required amount is set at 25% of the Peak Benchmark Reserve Capacity Price for the relevant Capacity Year, multiplied by the amount of Peak CRC assigned.

If the Capacity Credits assigned to a Facility differ from the amount of Peak CRC assigned following the Trade Declaration and the Network Access Quantity processes, the Market Participant may request AEMO to recalculate the amount of RCS it holds.

Failure to provide RCS or DSP RCS in the correct amount, designated form, and by the due date will result in the CRC assigned to that Facility lapsing.

Returning the RCS (excluding DSP)

For Facilities other than DSPs, RCS may be returned once the Facility has demonstrated it can meet the relevant performance and Commercial Operation requirements (clause 4.13.10 of the ESM Rules). This is demonstrated by:

• operating at or above 90% of its Required Level in at least two Trading Intervals; or
• providing an independent expert report confirming the Facility is capable of operating at or above 90% of its Required Level; and
• being considered by AEMO to be in Commercial Operation.

AEMO will return the RCS as soon as practicable after these requirements are met, and in any event by the applicable deadline after the end of the Capacity Year.

A Market Participant may also request an earlier return after the Capacity Year has commenced if the Facility has met 100% of its Required Level and is considered by AEMO to be in Commercial Operation (clause 4.13.13 of the ESM Rules).

Obligations and consequences to RCS

If a Facility does not meet the required operating requirements by the end of the relevant Capacity Year, the Market Participant may be required to compensate the market by paying an amount equivalent to the Reserve Capacity Security held for that Facility. Where the amount is not paid directly, AEMO may apply the Reserve Capacity Security toward that compensation.

DSP RCS

DSP Reserve Capacity Security is required for all Capacity Years and is returned on completion of all obligations. Compensation is paid for failure to complete operational readiness requirements prior to a Capacity Year commencing, voluntary reduction of capacity credits or failure to meet 90% of the Required Level.

A Market Participant may request the DSP RCS be released or waived (clause 4.13A.18 of the ESM Rules). In making its determination, AEMO will consider the following as part of its risk assessment:

• the size and types of Loads associated with the DSP;
• the DSP’s historical performance, including any Reserve Capacity Tests; and
• any other relevant matters.

RCS held for a DSP in one Reserve Capacity Cycle may satisfy the RCS requirement for the same DSP in a subsequent Reserve Capacity Cycle, provided the RCS remains in force and equals the highest amount required for any relevant Reserve Capacity Cycle.

RCS Templates

To find a copy of the templates for the Bank Guarantee and Security Deposit please visit the webpage:

A guide of how to complete the RCS documents:

Security Documentation User Guide

Further resources

• Section 4.13 and 4.13A of the ESM Rules.
• WEM Procedure: Reserve Capacity Security