Quantifying reserve capabilities for designing flexible electricity markets: An Australian case study with increasing penetrations of renewables

Abstract

Across several power systems with market frameworks, policy-makers are proposing that balancing flexibility requirements emerging during energy transition be addressed through new reserve product markets. However, these may introduce additional costs, constraints and complexity, and even encroach upon the functions of existing operational practices. Thus, policy-makers need to assess and compare flexibility design options, and quantifying system flexibility capabilities based on current and expected resource mixes can assist in achieving this. In this article, we offer a practical method to quantify the time-varying spectrum of upwards and downwards flexibility capabilities in systems, and subsequently apply it to historical and projected resource mixes in two regions of the Australian National Electricity Market. Our results suggest that with higher penetrations of renewable energy: (1) downwards flexibility margins can be exhausted around noon if wind and solar are unable or unwilling to provide it, (2) upwards flexibility becomes more scarce during morning and evening peak demand events and (3) a greater portion of upwards flexibility is provided by energy-limited resources. Given these trends, we recommend that policy-makers examine how existing operational practices can be augmented to elicit upwards flexibility provision, and that duration specifications and sustained footroom procurement be considered for reserve products.