Reforms are delivering real-time incentives for fast, flexible assets like batteries and inverter-based resources.
A new real-time incentive scheme is reshaping frequency control in the National Electricity Market (NEM), rewarding fast-responding assets and unlocking clearer price signals for emerging technologies.
The Australian Energy Market Operator (AEMO) has officially launched the Frequency Performance Payments (FPP) framework, replacing the long-standing ‘Causer Pays’ model with a five-minute, double-sided cost-allocation mechanism.
The reform, which went live on 8 June 2025, marks a significant milestone in the NEM Reform Program and targets more efficient and dynamic management of grid frequency.
Developed over five years in consultation with industry, FPP introduces a zero-sum system that pays market participants whose assets contribute positively to frequency stability, funded by charges to those whose assets degrade frequency.
This approach aligns operational incentives with system needs in real time, improving responsiveness as synchronous generation exits the market.
Crucially, the new model calculates contribution factors on a rolling five-minute basis using more granular telemetry data, offering a far more precise view of asset behaviour.
This represents a major technical improvement over the 4-second averages used in the previous regime and reflects the capabilities of high-speed inverter-based resources.
Michael Gatt, AEMO’s Executive General Manager of Operations, said the reform is pivotal for integrating fast, flexible technologies like grid-scale batteries, virtual power plants, and controllable loads.
“It brings real-time accountability, promotes market balance, and strengthens the case for fast, flexible technologies that are essential to maintaining grid stability,” Gatt said.
By providing transparent and dynamic incentives, FPP is expected to enhance the business case for technologies that can respond quickly to frequency deviations – critical in a system with increasing levels of non-synchronous renewables.
It also supports investment by giving participants better access to data on their performance and associated rewards or penalties.
Engineers and developers of inverter-based technologies stand to benefit from the sharper performance signals and expanded monetisation opportunities across ancillary service markets.
FPP may also inform future reform work around integrating synthetic inertia and fast frequency response capabilities.
