Adrian Kemp, Elaine Luc and Liam Hickey were pleased to assist the AEMC with an evaluation of the economic case for different market designs for the provision of inertia in the National Electricity Market (NEM), with a particular focus on whether a spot market mechanism could deliver better outcomes than the current contract-based approach.
Inertia is a power system characteristic that refers to the immediate and inherent resistance to changes in system frequency provided by rotating masses that are electromagnetically coupled to the power system. Inertia plays a crucial role in maintaining frequency stability by slowing the rate of frequency change following contingency events or disturbances, providing vital time for frequency control services to respond and restore the balance between supply and demand.
The NEM is expecting to experience a significant decline in system inertia as traditional synchronous generation is progressively replaced by renewable energy sources. Therefore, it has become increasingly important to consider an appropriate market design that promotes efficient supply of inertia in the future.
We advised the AEMC on an economic framework that can be applied to assess how different market designs might accommodate the unique characteristics of inertia services while promoting economic efficiency.
In addition, our analysis evaluated four potential sources of benefit from providing incremental inertia services in the NEM. These benefits arise from optimising inertia provision to reduce system costs, with each benefit category reflecting different operational circumstances where incremental inertia could deliver economic value.
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