The Australian Energy Regulator (AER) is required to monitor and report on events and causes that result in Frequency Control Ancillary Service (FCAS) price increases in the market exceeding $5000 per megawatt, for longer than one trading interval.
On 11 August, 1 September and 16 September 2016 South Australian FCAS prices exceeded this regulatory threshold.
The AER’s analysis determined there were similar contributing factors, across all three days, causing the sustained price increases. These included planned network outages, AEMO system security management approach and the subsequent rebidding by South Australian participants.
The planned network outages on the Heywood interconnector upgrade project, introduced the risk of disconnecting the South Australian region from the rest of the National Electricity Market (NEM). To address this risk to the security of supply in South Australia, the Australian Energy Market Operator (AEMO) mandates a local regulation service in South Australia to be maintained at a minimum of 35 megawatts.
Three South Australian participants, Engie, AGL and Origin, are registered to provide these services, and together they can provide up to 446 megawatts to meet the 35 megawatt requirement. Participants initially provided sufficient capacity at prices less than $500 per megawatt. The majority of the excess capacity was offered at prices around $12 000 per megawatt.
On separate days Origin and AGL rebid to reduce the volume of low-priced regulation services to less than the required 35 megawatts. This rebidding resulted in regulation FCAS prices exceeding $5000 per megawatt over a sustained period of time.
The combined cost of these price spikes to South Australian generators and consumers was around $17 million. The 35 MW local regulation requirement imposed by AEMO has cost South Australia generators and consumers around $47 million since its introduction in October 2015.
What is FCAS?
FCAS is required to maintain the frequency of the power system within the frequency operating standards. Regulation services continuously adjust to small changes in demand or supply (changes that cause the frequency to move by only a small amount away from 50 Hz). There are regulation services to increase the frequency (raise regulation) and services to decrease the frequency (lower regulation).