System Reliability
NEM Reliability standards are established by the Australian Energy Market Commission (AEMC) Reliability Panel. These standards currently require that unserved energy per year for each region must not exceed 0.002 percent of the total energy consumed in that region that year.
The NEM is required to operate with defined levels of reserve in order to meet the required standard of supply reliability. Under current standards, AEMO is required to ensure 850 megawatts of reserve is carried across the entire NEM.
The reliability safety net provisions of the National Electricity Rules provide that AEMO must procure sufficient reserve to ensure that the reliability of supply meets the reliability standard. When reserves acquired by AEMO are dispatched they are bid in at VoLL thus setting the spot price at the maximum level.
Read more about this topic: National Electricity Market
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