The Retailer Reliability Obligation (RRO) commenced on 1 July 2019, providing stronger incentives for market participants to invest in the right technologies in regions where it is needed, to support reliability in the National Electricity Market.
The Australian Energy Market Operator (AEMO) will identify any potential reliability gaps in each National Electricity Market (NEM) region in the coming five years using its Electricity Statement of Opportunities. If AEMO identifies a material gap three years and three months out, it will apply to the AER to trigger the RRO by making a reliability instrument.
Ministers for jurisdictions within the NEM also have the ability to trigger the RRO for their respective jurisdiction, if it appears to the Minister on reasonable grounds that there is a real risk during a period specified that the supply of electricity to all or part of the region may be disrupted to a significant degree on one or more occasions during the reliability gap period. Before making this instrument, the Minister must consult with AEMO and the AER on the T-3 reliability instrument they propose to make. Prior to April 2023, only the South Australian Minister had the ability to trigger the RRO.
Where a reliability instrument is made, liable entities are on notice to enter into sufficient qualifying contracts to cover their share of a one-in-two year peak demand. A Market Liquidity Obligation placed on Generators will ensure there are contracts available to smaller market customers by requiring certain generators in each region to make contracts available to the market. AEMO will also run a Voluntary Book Build mechanism to help liable entities secure contracts with new resources.
If the market response is insufficient and the AER confirms a reliability gap one year out, liable entities must report their contract positions for the reliability gap period to the AER. If actual system peak demand exceeds an expected one-in-two year peak demand, the AER will assess the compliance of liable entities and determine whether their share of load for the reliability gap period was covered by qualifying contracts.
AEMO may commence procurement of emergency reserves at this point through the Reliability and Emergency Reserve Trader framework to address the remaining gap with costs to be recovered through the Procurer of Last Resort cost recovery mechanism.
Entities whose required share of load is not covered by qualifying contracts for the specified period will be required to pay a portion of the costs for the Procurer of Last Resort, up to an individual maximum of $100 million.
Information for market participants
Register of reliability instruments
By 31 August each year, AEMO will identify any potential reliability gaps in each NEM region in the coming five years using its Electricity Statement of Opportunities (ESOO). If AEMO identifies a material gap three years and three months out, it will apply to the AER to trigger the RRO by making a reliability instrument.
The AER will publish its decision, the reasons supporting that decision and if applicable, the reliability instrument.