Briefing Note | February 2021

Reliability and Reserve Trader (RERT)

Key Points

The RERT (Reliability and Emergency Reserve Trader) is a last resort mechanism to keep the lights on during times of peak demand when electricity supply may be inadequate.
It allows the Australian energy Market Operator (AEMO) to tender for additional reserves of supply (mostly small generators) or additional demand response (paying industrial customers to reduce demand during peak periods) to be used when demand may be insufficient to meet supply.
It was created at the start of the NEM in 1998 but has been rarely used until the summer of 2017-18 when there were concerns over adequacy of supply following the closures of the Northern (2016) and Hazelwood (2017) power stations.
AEMO dispatched the RERT twice in the summer of 2017-18 at a total cost of $52 million. It was expensive: these first activations cost consumers the equivalent of around $62,000 per MWh.
The RERT cost for two events where it was called upon in the summer of 2018-19 was $34.5 million. It was used 5 times in the summer of 2019-20 at a total cost of $38 million, or $18,500 per MWh. Costs for 2020-21 look likely to be much lower due to the mild summer.
The basic mechanics of the RERT involve AEMO contracting a panel of reserve providers on specific terms as agreed. These terms vary from provider to provider. They typically include an availability payment to providers, payment to cover the costs of a reserve provider being ready and actual activation costs.
The need for some kind of strategic reserve in the NEM is likely to continue as part of the transition to a lower emissions generation source. The question is whether the RERT can evolve to be a more efficient vehicle, or what should replace it. The Finkel Review recommended the creation of a Strategic Reserve, while the AEMC has developed its own stricter form of demand response.

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