Extreme Weather Events
Assessing existing market mechanisms and regulatory frameworks (including governance of network regulation) to ensure facilitation of adequate, efficient, and timely investment in, and operation of, generation and networks.
Extreme Weather Events
| Work Stream: | Energy Market Reform |
| Council Priority Issue: | 6. Assessing existing market mechanisms and regulatory frameworks (including governance of network regulation) to ensure facilitation of adequate, efficient, and timely investment in, and operation of, generation and networks. |
| Project: | Review of the Effectiveness of NEM Security and Reliability Arrangements in light of Extreme Weather Events (the Review). |
| Timeline: | 28 April 2009: the Ministerial Council on Energy (MCE) tasked the Australian Energy Market Commission (AEMC) with the Review. 14 August 2009: the MCE revised the terms of reference for the Review.29 October 2009: the AEMC published the First Interim Report. 2 March 2010: the AEMC released the Second Interim Report. 4 August 2010: the AEMC released the Final Report. 8 June 2012: the MCE published its policy response |
| Key Documents: | MCE Terms of Reference – 28 April 2009 MCE (Revised) Terms of Reference – 14 August 2009 MCE Response to the AEMC Final report (Word / PDF) On the AEMC’s website: - First Interim Report - Second Interim Report - Final Report |
| Overview: | On 28 April 2009, the MCE directed the AEMC to conduct a review of the effectiveness of National Electricity Market (NEM) security and reliability arrangements in light of extreme weather events. On 14 August 2009, the MCE revised the terms of reference to require the AEMC to submit a second interim report providing specific advice on the reliability standard and the market mechanisms to achieve that standard. The Final Report concludes that there are a number of key areas where improvements can be made to existing electricity market frameworks and mechanisms to enable the NEM to respond more effectively to future extreme weather events. The Final Report makes recommendations around technical performance and power system security, the Reliability Standard, and governance arrangements. |
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| Background: | In late January 2009, South Australia and Victoria experienced extreme temperatures. In Adelaide, maximum temperatures exceeded 35ºC for nine consecutive days, with six consecutive days over 40ºC. For the first time in recorded history, Melbourne recorded three consecutive days over 43ºC. The high temperatures in South Australia and Victoria resulted in reductions in the availability of transmission elements at short notice, including the Basslink interconnector, and progressively reduced the availability of the Victorian generators on both 29 and 30 January 2009. In order to restore the balance between supply and demand, the Australian Energy Market Operator instructed that demand be reduced in both South Australia and Victoria. Consequently, there were supply interruptions to business and residential consumers.In its meeting on 6 February 2009, the MCE considered the challenges faced by the NEM in light of extreme weather events. As reflected in the meeting communiqué, the MCE agreed to task the AEMC with reviewing NEM security and reliability arrangements, with a view to identify areas for improving the resilience of the NEM, including possible benefits or lessons for the broader energy market framework. |
| Terms of Reference: | MCE Terms of Reference – 28 April 2009 (PDF)MCE (Revised) Terms of Reference – 14 August 2009 (PDF) |
| Process and Timelines: | The MCE intends to submit an initial rule change proposal by end of 2012. The MCE will request additional advice from the AEMC on indentified areas by end of 2012. |
| Supporting Documentation: | N/A |
| Consultation and Submissions: | N/A |
| Previous Consultation and Submissions: | Submissions to the review process can be found on the AEMC website. |