ETSI shares insights into looming introduction of Frequency Performance Payments in the NEM
ETSI’s Jack Fox has authored a compelling three-part series on industry blog, WattClarity, shedding light on the incoming Frequency Performance Payments (FPP) mechanism set to replace the Causer Pays model in Australia’s National Electricity Market (NEM). The series draws on Non‑Financial Operation (NFO) data to explore who stands to gain—and who may face new challenges—when FPP transitions to full financial operation on 8 June 2025.
1. Winners and Losers under FPP
Jack’s first article provides a foundational overview of the FPP scheme’s implications, highlighting broad movements by asset type:
Retail customers (the “Residual”) and wind generators emerge as early beneficiaries, capturing reduced regulation FCAS cost allocation.
Conversely, hydro, solar, coal, and battery storage assets appear to face increased cost burdens.
2. Top Performing Batteries
The second article drills down into battery storage units, analysing FPP performance on a per-megawatt basis:
Batteries significantly outperform other assets, with the top performers earning up to $1,976 per MW over an 87‑day period studied.
Notably, assets like Phillip Island and Bulgana BESS lead the list, though results vary across the sector.
3. Regulation Cost Exposure for VRE
In the third article, Jack examines how wind and solar farms—in particular Variable Renewable Energy (VRE) units—are likely to be impacted:
FPP splits regulation cost recovery between “used” and “unused” regulation, typically in a 35%:65% ratio.
VRE assets show poor default contribution factors, exposing them to higher unused regulation cost recovery—even when idle, such as during nighttime.
Jack’s analysis underscores the complex redistribution of costs and incentives introduced by FPP. While certain asset types—particularly batteries—may reap rewards, many VRE operators could see increased exposure unless proactive strategies are deployed.
If you’d like to explore how FPP could impact your assets—or discuss ways to strategically position your operation ahead of the 8 June settlement switch — ETSI is here to help.
