MARKET ANCILLARY SERVICE SPECIFICATION REVIEW FINAL REPORT AND DETERMINATION Published: 30 June 2017 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW EXECUTIVE SUMMARY The publication of this Final Report and Determination (Final Report) concludes the Rules consultation process conducted by AEMO to amend the market ancillary service specification (MASS) under clauses 3.11.2(c) and (d) of the National Electricity Rules (Rules). This review was prompted by:  The need to update the MASS to reflect the National Electricity Amendment (Demand Response Mechanism and Ancillary Services Unbundling) Rule 2016 No 10 (Ancillary Services Unbundling rule change), due to take effect on 1 July 2017; and  Technological developments which are increasing the range of market participants that can provide market ancillary services in the National Electricity Market (NEM). AEMO published an Issues Paper in January 2017 to elicit comments from Consulted Persons on any barriers to entry from new technologies in response to the Ancillary Services Unbundling rule change, and to ensure the document met the needs of the changing environment. Based on nine submissions to the Issues Paper, AEMO published a Draft Report and Determination (Draft Report) in April 2017, which included a draft of the MASS. Five submissions were received in response to the Draft Report. The submissions raised the following key topics:  No major technical barriers to new entrants identified.  The need for regulation service to ensure frequency recovers quickly.  Allocation of Frequency Setting to each constituent part of an Aggregated Ancillary Service Facility.  Impacts of ancillary service provision on causer pays contribution factors.  Measurement of response. AEMO has prepared this Final Report to detail the key issues raised by the five submissions to the Draft Report, and to communicate AEMO’s final determination. The key points in the final determination are:  There are no major technical barriers to entry for new entrants.  AEMO will allocate a range of Frequency Settings for each aggregated ancillary service unit, and the Market Participant will manage the allocation to relevant plant within the aggregated ancillary service unit.  The impacts of response to ancillary service signals on the causer pays contribution factor are beyond the scope of this review, and no changes have been made to the MASS.  It is critical that the response of all units enabled for ancillary services can be recorded and stored accurately. The MASS has been amended to include data transducers in the specification.  Some minor drafting issues have been addressed AEMO anticipates that further reviews to the MASS will follow consultation through the Ancillary Services Technical Advisory Group. AEMO’s final determination is to amend the market ancillary service specification in the form published with this Final Report. © AEMO 2017 2 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW CONTENTS EXECUTIVE SUMMARY 2 1. STAKEHOLDER CONSULTATION PROCESS 4 2. BACKGROUND 5 2.1 Rules requirements 5 2.2 Context for this consultation 5 2.3 First stage consultation 5 2.4 Second stage consultation 6 3. SUMMARY OF MATERIAL ISSUES 7 4. DISCUSSION OF MATERIAL ISSUES 8 4.1 Barriers to new entrants 8 4.2 The need for regulation service to ensure frequency recovers quickly 8 4.3 Allocation of Frequency Setting to each constituent part of an Aggregated Ancillary Service Facility 9 4.4 Impacts of ancillary service provision on causer pays 10 4.5 Measurement of response 10 5. OTHER MATTERS 12 6. FINAL DETERMINATION 13 APPENDIX A - GLOSSARY 14 APPENDIX B - SUMMARY OF SECOND ROUND SUBMISSIONS AND AEMO RESPONSES 15 ATTACHMENT 1 – MARKET ANCILLARY SERVICE SPECIFICATION 0 ATTACHMENT 2 – MARKED-UP COPY OF MARKET ANCILLARY SERVICE SPECIFICATION 1 © AEMO 2017 3 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW 1. STAKEHOLDER CONSULTATION PROCESS As allowed by clauses 3.11.2(c) and (d) of the Rules, AEMO has consulted on market ancillary service specification (MASS) in accordance with the Rules consultation procedures in rule 8.9. The consultation was conducted in the following stages: Process Stage Date Notice of First Stage Consultation and Issues Paper 25 January 2017 Submissions in response to Notice and Issues Paper received 10 March 2017 Draft Report and Draft Determination 26 April 2017 Submissions in response to the Draft Report received 19 May 2017 Final Report and Final Determination 30 June 2017 The Final Report is published in accordance of clause 8.9(k) of the Rules. All submissions received during the second stage of the consultation are summarised in Section 3 and discussed in Section 4. All submissions received during this consultation have been published on AEMO’s website at: http://www.aemo.com.au/Stakeholder-Consultation/Consultations/Amendment-Of-The-Market-Ancillary- Service-Specification. © AEMO 2017 4 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW 2. BACKGROUND 2.1 Rules requirements This Final Report concerns the application of clauses 3.11.2(c) and (g) of the Rules, which allow AEMO to amend the specification and standards for the provision of market ancillary services. Clause 3.11.2(b) of the Rules provides: (b) AEMO must make and publish a market ancillary service specification containing: (1) a detailed description of each kind of market ancillary service; and (2) the performance parameters and requirements which must be satisfied in order for a service to qualify as the relevant market ancillary service and also when a Market Participant provides the relevant kind of market ancillary service. The previous version of the MASS was published on 20 March 2012. AEMO may amend the MASS from time to time under clause 3.11.2(c) of the Rules. Clause 3.11.2(f) of the Rules provides that a Market Participant which has classified a generating unit as an ancillary service generating unit or a market load as an ancillary service load must install and maintain in accordance with the standards referred to in clause 3.11.2(g), monitoring equipment to monitor and record the response of the ancillary service generating unit or ancillary service load to changes in the frequency of the power system. Clause 3.11.2(g) provides for AEMO to develop and amend standards that must be met in installing and maintaining the required equipment. 2.2 Context for this consultation This review was prompted by:  The need to update the MASS to reflect the Ancillary Services Unbundling rule change due to take effect on 1 July 2017.  Technological developments which are increasing the range of Market Participants that can provide market ancillary services in the National Electricity Market (NEM). As a consequence, this document is focused on applying the MASS within the existing Rules framework and does not consider potential future amendments to the Rules. The scope of this review is discussed further in Section 4.2. AEMO is currently undertaking several related pieces of work on ancillary services and has establishing an Ancillary Services Technical Advisory Group to provide contributions to AEMO on matters relating to ancillary services, both current and those potentially needed in the future. AEMO anticipates that further reviews to the MASS will follow consultation through the Ancillary Services Technical Advisory Group. 2.3 First stage consultation AEMO issued a Notice of First Stage Consultation on 25 January 2017. AEMO prepared the Issues Paper to facilitate informed debate and seek stakeholder feedback on amendments to the MASS to:  Articulate the principles underlying the market ancillary service specification.  Identify and where possible address any barriers to entry for new Market Ancillary Service Providers.  Better define the services required in terms of what is needed for power system security.  Better describe the principles for verifying plant performance.  Provide more flexibility in allocating Switching Controller settings, particularly for aggregated units. © AEMO 2017 5 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW AEMO received nine written submissions in the first stage of consultation. These respondents were:  AGL.  Australian Energy Council.  Clean Energy Council.  Delta Electricity.  ENGIE.  EnerNOC.  ERM Power.  Hydro Tasmania.  United Energy. Copies of all written submissions have been published on AEMO’s website at: http://www.aemo.com.au/Stakeholder-Consultation/Consultations/Amendment-Of-The-Market-Ancillary- Service-Specification. 2.4 Second stage consultation On 26 April 2017, AEMO issued a Notice of Second Stage Consultation along with the Draft Report and the draft market ancillary service specification, both of which are available on AEMO’s website.1 AEMO received five written submissions in the second stage of consultation. These respondents were:  Delta Electricity.  EnerNOC.  Snowy Hydro Limited.  Tilt Renewables.  Yokogawa Australia. Copies of all written submissions have been published on AEMO’s website at: http://www.aemo.com.au/Stakeholder-Consultation/Consultations/Amendment-Of-The-Market-Ancillary- Service-Specification. Responses to these submissions are included in this Final Report. 1 http://www.aemo.com.au/Stakeholder-Consultation/Consultations/Amendment-Of-The-Market-Ancillary-Service-Specification. © AEMO 2017 6 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW 3. SUMMARY OF MATERIAL ISSUES The key material issues arising from the proposal and raised by Consulted Persons are summarised in the following table: No. Issue Raised by Barriers to new entrants Delta Australia 1. The need for regulation service to ensure frequency recovers quickly Yokogawa Australia 2. Allocation of Frequency Setting to each constituent part of an Aggregated EnerNOC 3. Ancillary Service Facility Impacts of ancillary service provision on causer pays Snowy Hydro Limited 4. Measurement of response Delta Electricity , EnerNOC, 5. Snowy Hydro Limited A detailed summary of issues raised by Consulted Persons in submissions, together with AEMO’s responses, is contained in Appendix B. © AEMO 2017 7 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW 4. DISCUSSION OF MATERIAL ISSUES 4.1 Barriers to new entrants 4.1.1 Issue summary and submissions In the Issues Paper, AEMO sought feedback on any barriers to new entrants participating in the ancillary services markets and identified a number of issues for stakeholders to consider. In the Draft Determination, AEMO addressed an issue relating to the ability for aggregated units to provide regulation services. In its response to the Draft Determination, Delta Electricity agreed with AEMO that no major technical barriers appear to exist in the MASS, and supported AEMO’s determination that no major amendments are required to remove such barriers. 4.1.2 AEMO’s assessment Submissions have not identified any major technical barriers for the entry of new entrants offering new or emerging technologies into the ancillary services markets. 4.1.3 AEMO’s conclusion AEMO determines that no major amendments are required to the MASS to remove barriers to entry. 4.2 The need for regulation service to ensure frequency recovers quickly 4.2.1 Issue summary and submissions Yokogawa Australia identified that the draft MASS required that generating units enabled for regulation services should respond to AGC instructions as soon as frequency returns to the range of 49.9 Hz to 50.1 Hz. However, variable controllers, such as governors on thermal generators are not providing much service as frequency approaches these limits again. Without Automated Governor Control (AGC), this is likely to inhibit recovery. Yokogawa Australia proposed that a solution could be for units to respond to AGC raise or lower commands once any “FCAS” raise services are not also raising load or lower services are not also lowering load. 4.2.2 AEMO’s assessment AEMO has reviewed the relevant clause of the Draft MASS (clause 6.9, Response to AGC instructions during and after a contingency event) and believes that it is important to avoid over delivery of services and potential further frequency events by providing clear requirements for plant providing both contingency and regulation services. AEMO supports the view from Yokogawa Australia that at frequencies close to the dead-band generating units with variable controllers, such as governors on thermal or hydro generators, are not providing much service. Regulation services are needed to ensure that frequency recovers close to 50 Hz and should respond to AGC instructions once the frequency enters the normal operating frequency band. © AEMO 2017 8 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW 4.2.3 AEMO’s conclusion AEMO determines that generating units or loads enabled to provide both regulation and contingency services should respond to raise or lower instructions received from AEMO’s AGC system raise or lower commands once frequency has recovered to the normal operating frequency band. AEMO has amended the MASS to reflect this conclusion. 4.3 Allocation of Frequency Setting to each constituent part of an Aggregated Ancillary Service Facility 4.3.1 Issue summary and submissions EnerNOC questioned how AEMO will assign the range of Frequency Settings to each relevant plant of an Aggregated Ancillary Service Facility. The draft MASS was not clear on how these Frequency Setting would be allocated. Options for this could be for AEMO to allocate individual Frequency Setting to each relevant plant of the Aggregated Ancillary Service Facility at the time of registering each incremental constituent part, or for AEMO to allocate the Aggregated Ancillary Service Facility a range of Frequency Settings, with the expectation that the participant will manage the allocation of Frequency Settings across the relevant plant of the Aggregated Ancillary Service Facility. Both options would aim to achieve some sort of even balance across the range. 4.3.2 AEMO’s assessment In allocating a range of Frequency Settings for the relevant plant of an Aggregated Ancillary Service Facility, AEMO is aiming to achieve a combined response similar to that of variable controller, and in doing so, minimise the potential for over delivery of services. There is an expectation that Market Participants will, from time to time, amend the list of relevant plant making up an Aggregated Ancillary Service Facility. In doing this, the Market Participant would be required to allocate Frequency Settings to provide the required aggregate response from the Aggregated Ancillary Service Facility. Having Market Participant undertake the detailed allocation of Frequency Settings, both initially and following any amendments to the Aggregated Ancillary Service Facility, will reduce the administration costs of registration and allow the Market Participant the maximum flexibility in achieving the desired outcome. AEMO recognises that there may be issues in relation to the frequencies that can be allocated to some of the relevant plant in an Aggregated Ancillary Service Facility, and recognises the need for some negotiation on how the settings are allocated. 4.3.3 AEMO’s conclusion AEMO determines that, where possible, it will negotiate with the Market Participant to allocate a range of Frequency Settings and allow the Market Participant to allocate these across the relevant plant of the Aggregated Ancillary Service Facility to simulate the behaviour of Variable Controllers. AEMO has amended the MASS to reflect this conclusion. © AEMO 2017 9 MARKET ANCILLARY SERVICE SPECIFICATION REVIEW 4.4 Impacts of ancillary service provision on causer pays 4.4.1 Issue summary and submissions Snowy Hydro Limited raised a number of questions on the clarity on the computation of causer pays contribution factors. Snowy Hydro Limited suggested that it is possible for the Service Provider to detect a local frequency excursion that triggers a contingency service response while the frequency measured remotely by AEMO may not indicate a contingency event. As a consequence, the Service Provider will be away from its energy target, which negatively impact on the causer pays contribution factor calculated for the period. Snowy Hydro Limited commented that it is possible for a Service Provider that was enabled to provide Regulation FCAS services, and receiving combined energy and regulation service dispatch targets, to continue to receive abnormally high/low targets for a significant amount of time after the Service Provider is no longer enabled for provision of Regulation service. This could also negatively impact on the causer pays contribution factor calculated for the period. 4.4.2 AEMO’s assessment The MASS is required to provide a detailed description of each kind of market ancillary service, and the performance parameters and requirements which must be satisfied in order for a service to qualify as the relevant market ancillary service, and also when a Market Participant provides the relevant kind of market ancillary service. As such, the MASS is focused on the technical design and performance of plant offered into the ancillary services markets. AEMO acknowledges that there are interactions between the operation of the market ancillary services and the calculation of the causer pays contribution factors used for the recovery of the costs of providing regulation services. However, AEMO does not believe it is appropriate or efficient to address these issues in the MASS. They are more appropriately covered in the Causer Pays Procedure. 4.4.3 AEMO’s conclusion AEMO determines that the issues concerning the calculation of causer pays contribution factors are beyond the scope of the MASS. 4.5 Measurement of response 4.5.1 Issue summary and submissions A number of submissions raised questions relating to the measurement of the response of services to contingency events. Snowy Hydro Limited suggested that the MASS was unclear on whether a Market Participant was required to record and store data for contingency events at times when they are not enabled to provide the services. EnerNOC asked whether there was a requirement for a Market Participant to record and store data for a contingency event if the local frequency does not reach the Frequency Setting for the enabled service and the Facility is not expected to respond. Delta Electricity also suggests that more detail is required in the MASS to ensure that the source instrumentation has the same specifications as the data recorder specification. © AEMO 2017 10