Australian regulator to fine grid assets which destabilize ferquency and reward those which balance it

AEMO has launched a reform of electricity-grid FPP, creating a significant shift in how participants in the NEM grid are incentivized, and penalized, for their impact on electricity frequency stability.

Participants helping to maintain system frequency near 50 Hz, which AEMO says is crucial for managing a secure and reliable power system, will receive incentives, which are recovered from those with unhelpful impacts – forming a zero-sum system.

The traditional “causer-pays” system is now replaced by a double-sided mechanism where participants whose assets have a destabilizing impact on frequency will incur penalties, which are recovered every five minutes, to pay assets that stabilize the grid.

Under the new arrangements, generation units’ performance – and five-minute “contribution factors” calculated for FPP – will be used to allocate the recovery of regulated, grid strengthening frequency control and ancillary services costs.

The new system improves accuracy in near real time, giving generators, batteries, and users with large electricity loads strong, clear economic signals while incentivizing the goal of frequency stability through project operations.

AEMO Executive General Manager of Operations Michael Gatt said the reform represents a transformational shift in how the power system is managed as the energy market continues to transition toward a lower emissions future.

“The implementation of FPP brings real-time accountability, promotes market balance, and strengthens the case for fast, flexible technologies that are essential to maintaining grid stability as traditional generation retires,” Gatt said.

“Participants now have access to better data and clearer incentives that support more efficient operations.”

Gatt added that by recognising and valuing the role of emerging technologies such as batteries and demand-responsive electricity loads, FPP enhances investment signals and supports innovation across the sector.

“It ensures that those who contribute positively to system frequency are fairly compensated while costs are recovered from those with an unhelpful contribution – aligning market behaviours with system needs. This reform is about equipping the NEM for the future,” Gatt said.

The reform officially went live on Sunday.

From pv magazine Australia.