Frequency Performance Payments project

Background

As the generation mix transforms and more renewable sources and batteries come on-line, it is increasingly important to provide frequency response to keep the electricity grid stable and control system frequency as close to 50Hz to keep the system secure.

On 8 September 2022, the Australian Energy Market Commission (AEMC) published the Primary frequency response incentive arrangements rule to address this. 

AEMO established the Frequency Performance Payments (FPP) project under the NEM Reform Program to carry out the procedure and system changes arising from the rule and to support industry readiness for the changes.

Scope

AEMO uses Regulation Frequency Control and Ancillary Services (FCAS), to make relatively small adjustments to the supply and demand balance in the electricity system. 

Under the current Causer Pays framework, electricity generators are assessed based on the relative unhelpfulness of their impact on the power system frequency. Causer Pays recovers Regulation FCAS costs from those electricity generators who have an overall negative impact on the power system, while those who do not have a negative impact avoid paying any costs.

The reform creates a system of positive and negative FPPs, which will give market participants information on their frequency performance and its dollar value (or cost). Under the new arrangements, generation units’  performance and five-minute Contribution Factors (CF) calculated for FPP will be used to allocate the recovery of Regulation FCAS costs. Ultimately, the rule is intended to incentivise plant behaviour that reduces the overall cost of frequency regulation in the National Electricity Market. 

Timeline

Industry engagement

This initiative forms part of NEM Reform Program and market participants can get involved by visiting:

Procedure changes

The following procedures needed to change to implement the FPP project:

Implementation toolbox

The Implementation Toolbox is a central location for useful resources to help participants understand and prepare for the changes associated with the rule implementation.

Educational resources

Videos