Fact sheet: Explaining emergency reserve contracts

18/12/2020
3 min

 

As the national market operator, AEMO’s role is to deliver energy security for all Australians. We do this by working with government and industry to establish a number of processes and arrangements to mitigate risks to energy supply during high demand conditions.

This includes issuing Lack of Reserve (LOR) notices when electricity reserves are depleting as a result of a combination of unplanned conditions. LOR notices provide an indication to the market to encourage more generation. Visit this page for more information about LOR notices.

Another arrangement available to AEMO, particularly during the summer months, is the Reliability and Emergency Reserve Trader (RERT) mechanism. This helps AEMO to maintain power system reliability and system security using reserve generation and demand management contracts from large users, such as industrial or manufacturing businesses, that sit outside the market.

In preparation for summer, AEMO published its 2020-2021 Summer Readiness Plan, highlighting the plans and actions to prepare Australia’s power system for the summer months, including updated RERT contracts.

The NEM is in a more positive supply-demand position heading into the 2020/21 summer compared to 2019, with no supply shortfalls in excess of the reliability standard projected.

Up to 3,400 megawatts (MW) of new wind and solar generation capacity has been added since last summer, and generation units are expected to complete their planned outages before Christmas.

As a precautionary measure, AEMO has received expressions of interest for more than 1,900 MW of additional reserves through the Reliability and Emergency Reserve Trader (RERT) panel function. These are used only if the market does not respond with enough supply or demand resources to meet the reliability standard or manage power system security incidents, such as the loss of multiple generation or transmission assets

The panel agreements allow AEMO to manage the risk of not meeting the reliability standard, without committing to reserve contracts or availability payments until they are needed.

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