AER wrote letters to Semi-Scheduled participants (and others) with respect to ‘Expectations surrounding the use of self-forecasting’

We already wrote about AER concerns with respect to ‘games that self-forecasters can play’ on two prior occasions:

• On 4th December 2024, we wrote about how ‘AER sends clear message on self-forecasting behaviours’ during the AEMO Intermittent Generation Forum; and
• On 20th February 2025, we belatedly wrote about how ‘AER published ‘Semi-Scheduled Generator Compliance Bulletin’ on Tuesday 4th February 2025’.

… so these instances were followed up with one-on-one letters at the end of February 2025* from the AER team in the Compliance and Enforcement Branch to Semi-Scheduled generators, and other interested parties, warning of the AER’s concerns about self-forecasting practices.

 * I’ve back-dated this article to suit the timing of the letter.

We were not (at that time) on that particular distribution list at the AER, but

• heard of these letters from several different sources,
• and have since requested inclusion on the AER’s list.

Given the make-up of the readership here on WattClarity, I thought it would be relevant to the broader group of readers to copy in some snippets of this communication in here:

 

Purpose of the Letter

The AER stated that…

‘The purpose of this letter is to:
• outline the AER’s concern with the submission of ‘biased’ self-forecasts by a number of semi-scheduled generators (SSG); and
• provide guidance in relation to the AER’s expectations around the usage of self-forecasting.’

 

What are the AER’s concerns about biasing?

Frequent readers here will recall that we’ve been voicing concerns about the ‘games self-forecasters can play’ for many years … including back in GenInsights21 when we asked the question ‘What is the purpose of Self-Forecasting?’.

So it was with interest that we read (direct from the AER) about the AER’s concerns that…

‘The AER considers that this behaviour is contrary to the policy intention of self-forecasting and has significant concerns, including that:
• the conduct may pose risks to system security, particularly with an increased uptake in the usage of self-forecasting (and any associated biasing);
• biased self-forecasts may impact on the integrity of AEMO’s forecasts, upon which both AEMO and participants rely, and on AEMO’s ability to rely on the accuracy of any self-forecast provided;
• there are potential competitive advantages for participants engaging in biasing due to the reduction in the allocation of costs for regulation FCAS;
• the conduct results in increased costs to consumers and other participants, as they bear a larger proportion of the allocation of regulation FCAS costs; and
• the conduct adversely impacts on dispatch outcomes which may also flow through to the integrity of pricing and distort dispatch outcomes for other generators.’

The AER wrote about the change from ‘Causer Pays’ to the new Frequency Performance Payments method, and how it might make it more difficult to engage in such games, but that…

‘Regardless, we understand that the commercial incentive to engage in this behaviour will remain under the new system. As a result, we will be carefully observing the effect of these changes on self-forecasting behaviour.’

 

What are the AER’s expectations?

The AER wrote that:

‘The AER expects that participants who elect to provide a self-forecast:
• ensure that self-forecasts are as accurate as can be reasonably expected to reflect anticipated generation capacity, and should not overstate generator capability;
• regularly assess the performance of their self-forecasts; and
• apply learnings and take measures to ensure that they are continually ensuring that their self-forecasts reflect expected generation capacity.’

 

 

Thrice warned?

So it’s clear to me (and others) that the AER has provided clear warning …