Meeting system strength requirements in NSW

Transgrid will be bound by the confidentiality obligations under 8.6.1 of the National Electricity Rules. This applies to confidential information provided to Transgrid under or in connection with the Rules. Specifically, clause 8.6.1 requires that Transgrid:

• not disclose confidential information to anyone except where permitted under the rules (exceptions are in 8.6.2);
• must only use the information for the relevant purpose; and
• must not permit unauthorised access.

Proponents should clearly identify any confidential or commercially sensitive information included in their proposals.

We strongly encourage all intending providers of non-network system strength services to respond to our EOI. This will ensure that we have adequate information about your project and technology type to include it in the RIT-T assessment.

EOI responses will inform Transgrid’s RIT-T assessment on meeting system strength requirements in NSW. The RIT-T is the economic cost-benefit test that will assess which solutions (i.e. technology types, locations, etc.) make up the preferred mix of solutions to meet the identified need and provide the greatest economic net benefits to the NEM. Once the RIT-T is finalised, and/or in parallel, we intend to conduct a competitive process to procure this preferred mix of solutions (where they involve non-network services).

Yes. The RIT-T is a staged process, with several further opportunities for consultation and refinement of assumptions and analysis. The EOI responses will be used to inform a draft ‘optimal’ portfolio of system strength solutions to meet the Shortfall and Rule Change requirements, as published in the RIT-T Project Assessment Draft Report (PADR). During the PADR consultation period, proponents can update and refine their proposal, for consideration in the final RIT-T stage, the Project Assessment Conclusion Report (PACR).

The RIT-T is a whole-of-market economic cost-benefit test which seeks to identify the transmission investment option(s) that maximises net benefits to the NEM – which may include network and/or non-network solutions. In August 2020, as part of its update to its RIT-T Application Guidelines, the Australian Energy Regulator (AER) clarified that the RIT-T analysis should reflect the total costs and total market-wide benefits of credible non-network options (a change from the previous approach, in which costs of non-network options in the RIT-T were estimated based on the service agreement costs  expected in a tender process).

For example, if a solution requires a new grid-scale battery with a capital cost of $100m, the RIT-T analysis must capture:

• The full capital cost of $100m, and full operating costs, regardless of the ownership of the battery and whether the owner of the battery intends to also use it to provide other services in the National Electricity Market, and the price that Transgrid would pay for the associated network support contract for system strength services; and
• The NEM-wide benefits the battery would provide, including where it is operating to provide other services in contestable energy markets in addition to system strength. These benefits are typically quantified using energy market modelling.

Note that the capital costs of existing and committed assets are considered to be sunk (and therefore zero) in conducting the RIT-T assessment, although the incremental capital cost of any modifications to existing facilities (and any incremental operating costs) must be captured. Similarly, where existing assets are already operated to provide other services in the National Electricity Market, only the benefits associated with any changes in this operation are captured in the RIT-T assessment.

To enable the RIT-T to identify the optimal portfolio of solutions to meet the system strength needs, the relevant capital and operating costs of your solution must therefore be provided. 

Information about the expected price of network support services to provide system strength services is also captured in the RIT-T, as both a cost to Transgrid and a benefit to the service provider (i.e., it is effectively treated as a wealth transfer between energy market participants).  

Where non-network solutions are determined by the RIT-T to form part of the optimal portfolio of solutions, Transgrid intends to run a competitive process and/or commercial negotiations to procure these services from the market. Solutions will be assessed on price (amongst other criteria), rather than economic cost, to ensure costs to energy consumers are as efficient as possible. Transgrid will need to be able to demonstrate to the AER that these network support costs are efficient, as part of the provisions under the Rules for passing through these network support costs to consumers.

Transgrid will treat any requests for confidentiality in regard to the cost and price information provided in line with our obligations under 8.6.1 of the National Electricity Rules (see FAQ 1).

Transgrid is required to fill a system strength Shortfall at Newcastle and Sydney West nodes from 1 July 2025 to 1 December 2025. Your project will be considered ineligible to fill the system strength shortfall if it is not operational before 1 December 2025.

Transgrid is required to meet minimum and efficient levels of system strength under the System Strength Rule Change, from 2 December 2025, on an ongoing basis into the future. Since we are required to meet the need from day 1, we will put in place a portfolio of solutions to meet this need from 2 December 2025. However, solutions do not need to be available on 2 December 2025 to be considered. We will actively consider solutions that will become available later (and make other arrangements to meet the need in the meantime) if it would result in lower overall costs for our network customers.

Our current expectation is that we are likely to procure system strength using a mix of long and short-term contracts, and will periodically re-enter the market for non-network system strength services prior to contract expiry. We have not yet determined the appropriate procurement frequency, and this strategy will be informed by the EOI responses and RIT-T outcomes.

Transgrid has not yet finalised its intended contract structure for system strength services. We expect this, and other commercial information, to be provided to proponents during formal procurement processes and/or service negotiation.

Transgrid anticipates that system strength contract structures and dispatch arrangements will reflect the Australian Electricity Market Commission’s final determination on the Operational Security Mechanism (OSM), expected in July 2023. The draft OSM determination suggests that suppliers of system strength will be required to supply their system strength via the OSM. Transgrid’s interpretation of the draft determination is that:

• Transgrid will be responsible for entering into System Strength Contracts under the System Strength Rule Change, including specifying the availability that services are required, and making availability (or similar) payments
• A contract with Transgrid would require you to obtain OSM accreditation (and meet any other requirements) to make your system strength service available via OSM, at the agreed times, quantities, and maximum bid prices;
• AEMO will be responsible for dispatching services in the operational time horizon, and making operating payments (variable $/MWh or $/h and enablement payments) as part of the OSM.

Details relating to OSM are subject to change in the final OSM rule change determination.

For the shortfall requirement (1 July 2025 to 1 December 2025):

• A contract with Transgrid would require you to make system strength services available to Transgrid/AEMO at the agreed times and quantities;
• If/when required, your system strength services will be “enabled” by Transgrid/AEMO in accordance with clause 4.4.5 of the NER;
• Transgrid would make system strength service payments to you.

We welcome proponents suggesting alternative contract structures or commercial models, particularly where it may help reduce the total cost to consumers, e.g.:

• Payment structures that make trade-offs between availability, enablement, and variable payments
• Proposals for how payments / prices could be structured, i.e., we do not necessarily require a single fixed price for the life of the contract – you could offer a schedule of prices etc., noting that OSM bid prices will need to structured in accordance with OSM procedures, which are yet to be determined.

Any technology that can provide fault current is eligible to provide system strength for the shortfall requirement (from 1 July 2025).

For the System Strength Rule Change requirement (from 2 December 2025):

• Any technology that can provide fault current is eligible to provide system strength for the minimum and/or efficient levels of system strength.
• Any technology that can help maintain stable voltage waveform is eligible to provide system strength for the efficient level of system strength.

Potential non-network options may be existing plant or new plant and can include but are not limited to:

• synchronous generators;
• synchronous hydro units operating in ‘synchronous condenser’ mode;
• conversion of existing synchronous generators to synchronous condensers;
• synchronous condensers (with or without fly wheels);
• grid forming battery energy storage systems;
• grid forming inverter-based renewable generators;
• grid forming SVCs or STATCOMs; and
• other modifications to existing plant.

There are two ways that a grid-forming inverter solution (e.g.  grid-forming batteries and grid-forming STATCOMs) can meet Transgrid system strength requirements:

Fault current

A grid-forming inverter’s ability to provide fault current may depend on many factors, including (but not limited to) its: 

• Short-term current capability (for the avoidance of doubt, a short-term overload capability can increase fault current contributions, but not mandatory);
• Other technical characteristics/capabilities;
• Control strategy;
• Proposed/agreed generator performance standards;
• Pre-fault state.

Battery/inverter vendors are best placed to advise on these matters.

The detailed technical requirements for a grid-forming inverter providing fault current are still to be determined. However, Transgrid’s current understanding is that a grid-forming inverter provides fault current contributions regardless of how much power it was expecting immediately prior to the fault (e.g. as a result of energy/FCAS market dispatch).

Stable voltage waveform

AEMO has defined a stable voltage waveform in their System Strength Requirements Methodology. In addition to fault current, grid-forming inverters can also use other grid-forming capabilities (e.g. fast dynamic voltage control) to help maintain a stable voltage waveform.

A grid-forming inverter’s ability to help maintain a stable voltage waveform will depend on its ability to be tuned to address the specific issues present in its location in the network. To help us evaluate proposals, proponents should provide relevant information about the inverter’s technical specifications and grid-forming capabilities.

Following the EOI, Transgrid will be seeking PSSE and PSCAD models (PSCAD v4.6.3 & PSCAD v5) of the proponents’ solution to facilitate the technical evaluation.

Value stacking

By default, proponents should not assume that they need to withdraw all or significant quantities of capacity from the energy/FCAS market to provide system strength support. Proponents should seek advice from battery/inverter vendors on how inverters can best support Transgrid’s system strength needs and any implications for value stacking of different services.

Solutions will be more competitive in both the RIT-T, and subsequent procurement process, if they are located electrically close to (low impedance between):

• One or more of the six system strength nodes in NSW; and/or
• Large quantities of proposed inverter-based resources (e.g. solar and wind generators), as per AEMO’s inverter based resource forecasts.

This is because solutions for the minimum level of system strength will be assessed based on their ability to provide fault current to system strength nodes, which is dependent on their rated capacity and their electrical distance to the need (fault level nodes). Solutions for the efficient level of system strength will be assessed on their ability to help maintain a stable voltage waveform at the connection points of inverter-based resources, as such, the closer they are electrically to the inverter based resources, the more support they’re likely to provide.

Transgrid’s EOI states that proponents should be available for enablement for 95% of each year or part of a year for which the service is offered, and that, Transgrid will, at its discretion, consider lower availability measures where significant cost savings can be demonstrated as a result of lower availability measures. Therefore, EOI submissions will be considered if the proposed available is less than 95%.

For proponents seeking to offer solutions that have availability less than 95%, the following information should be provided:

• The reasons for periods of (un)availability;
• Whether the periods of (un)availability are predictable;
• How much notice (if any) you will be able to give for periods of (un)availability.

Transgrid has not yet proposed a penalty regime for the failure of proponents to deliver system strength services. We expect this, and other commercial information, to be provided to proponents during formal procurement processes and/or service negotiation.

Any penalty regime will reflect the consequences and costs to Transgrid if services are not available when needed.

While this RIT-T focusses on system strength, the capability of your solution to provide voltage control, inertia, and other essential system services may be considered in the evaluation criteria to the extent that they help contribute to a stable voltage waveform.

Our RIT-T analysis may also consider the value of your solution to help meet future needs, including inertia, and other essential system services.

System strength contributions from interstate will help meet system strength requirements in NSW, and our RIT-T analysis will consider this. Transgrid is currently working with industry stakeholders to determine how system strength contributions from interstate non-network solutions will considered.

At this stage, Transgrid requests that interstate proponents respond to our EOI should they wish to provide system strength services to NSW.