Above all: reliable, secure energy at the best price for consumers

Australia’s energy system is undergoing a revolution – driven by changing consumer choices and rapidly evolving technology.

The AEMC’s work program is focused on:

  • keeping the lights on as the market transitions to new technologies including battery storage and renewables
  • energy at the best price for consumers.

Keeping the lights on

The generation mix of the power system is changing. The renewable energy target is encouraging more wind and solar generation to enter the market. At the same time coal-fired generators are retiring. We are also seeing more rooftop solar PV, microgeneration and battery storage.

Having more renewable, non-synchronous generation, like wind and solar, affects the technical characteristics of the electricity system.

New approaches to maintaining power system security are needed. System security is all about the power system’s ability to withstand the unexpected loss of electricity supply from sudden equipment failure.

System reliability is about having enough generation, demand response and network capacity to supply consumers.

System security and reliability are being addressed through:

  • our reviews into system security and frequency control frameworks
  • gas market changes to support system security
  • our reliability frameworks review
  • Reliability Panel work
  • effective integration of emissions reduction policy
  • review into South Australia’s system black event
  • contributing to the Finkel review

and you can read more about these below.

System security work

Our system security review was initiated in July 2016 to strengthen the security of the National Electricity Market and address fundamental questions raised by the technological revolution underway in the national power system.

In 30 March 2017 we made a final rule to help protect the power system from emergencies through a new management framework for emergency frequency control schemes. These are ‘last line of defence’ mechanisms such as controlled load shedding, designed to protect against a major blackout if a sudden and unexpected loss of generation or load causes rapid changes in system frequency.

In June 2017 we published a power system security report with a package of reforms to guard against technical failures that lead to cascading blackouts, and to deliver a more stable and secure power supply to Australian homes and businesses.

In July 2017 we initated our Frequency control frameworks review which is looking at ways to integrate new technologies and demand response to help keep the system secure. A draft report is due in March 2018.

In September 2017 we published a package of new rules that will involve AEMO and network businesses implementing solutions together to provide minimum levels of inertia and system strength.

Gas market changes to support system security

A more efficient gas market improves the power system’s ability to integrate renewables like wind and solar. Gas-fired generation is able to provide fast-start backup to complement these newer forms of generation. Changes to existing gas markets that make it easier to buy and sell gas should increase competition and help lower supply costs for gas-fired power stations.

Governments agreed to implement reforms to enable faster and more efficient gas trading along the east coast following the AEMC’s 2016 gas market review.

Reliability frameworks review

In tandem with our system security program, the AEMC is undertaking a system reliability program, which includes a Reliability frameworks review, This review is considering a range of fundamental changes to market design to improve the ability of the market to deliver more capacity, and capacity valued by the power system, when it is needed – both in the short and longer term. A directions paper is due to be published in March 2018.

Reliability Panel work

The AEMC’s Reliability Panel determines standards and some of the guidelines for maintaining a secure and reliable power system, as well as reviewing, monitoring and reporting on system performance. The Panel is comprised of members who represent a range of participants in the national electricity market, including the Australian Energy Market Operator (AEMO), generators, network businesses, consumers and large end users.

In March 2017 the Panel started its four yearly review of the reliability standard and settings and in November 2017 published draft recommendations for stakeholder feedback.

In May 2017 the Panel published the final report for its annual review of the performance of the power system for the period July 2015 to June 2016.

Effective integration of emissions reduction policy

Energy and emissions reduction policies have different objectives and need to be developed so efficiency trade-offs and costs are well understood. Environmental policies that are appropriately designed and integrated can achieve their objectives while minimising costs faced by consumers in energy markets.

Read about the AEMC's advice to governments on integrating emissions policy.

Review into South Australia’s system black event

The COAG Energy Council has asked the AEMC to undertake a review into South Australia’s system black event  on 28 September 2016. This will build on work by the market operator, AEMO, into technical aspects of the event; and the Australian Energy Regulator’s investigations.

The AEMC will focus on systemic issues that caused the system black or affected the response. We will look at possible changes to market rules and legislation flowing from analysis of those systemic issues. 

Finkel review

We contributed our expertise to the Independent Review into the Future Security of the National Electricity Market, chaired by the Chief Scientist, Dr Alan Finkel AO. Read our submission to the review.

Learn more about the AEMC's system security and reliability work program.

Energy at the best price for consumers

Consumers are driving the transformation of the energy sector through the decisions they make about their household and business energy needs.

Reforms flowing from the AEMC’s Power of choice review have laid foundations for an energy system where more engaged and better informed energy shoppers have greater access to new products and services like solar, storage, electric vehicles and smarter consumption management.

Key reforms include new rules to support competition in metering and cost-reflective prices.

Competition in metering reforms

The AEMC’s Competition in Metering reforms removed the networks’ effective metering monopoly – giving consumers more opportunities to access a wider range of electricity services.

New arrangements will take effect on 1 December 2017. There will be more competition between retailers, networks and others to deliver new services via smart meters; giving consumers the choice of keeping existing working meters or to take up new services enabled by advanced meters.

Cost-reflective pricing

From 2017 the prices paid by households and businesses will better reflect the different ways they use electricity and the costs of providing it to them. When prices reflect how much it costs to use different appliances at different times, consumers are able to make more informed decisions in the face of changing energy products and services and increasingly competitive energy deals.

Network regulation reforms based on business efficiency

We have changed the rules which govern the ‘incentive based’ regulatory framework for network businesses. The rules increased the regulator’s ability to base regulation on business efficiency. Allowed revenues for the network businesses are set by using the most prudent, efficient operators as a benchmark. This is important because around 50 per cent of an Australian consumer’s electricity bill is made up of network costs to build poles and wires.

The same rules apply to both government-owned and privately-owned networks.

Learn more about key reforms to network regulation and cost-reflective pricing.

Monitoring change in energy markets

Our work program includes ongoing monitoring of energy markets to provide governments and consumers with an understanding of market transformation. Our reviews include analysis of:

  • Prices: an annual report on price trends which looks at what is driving changes in household electricity bills. Understanding these drivers can help identify appropriate policies that enable the ongoing supply of reliable, secure energy at the best price to consumers.

Learn more about price trends including how mixed signals are driving wholesale price volatility.

  • Competition: an annual retail competition review to assess the current state and future development of competition for small customers (residential and business customers) in retail energy markets in Australia. Our latest review, published in July 2017, found retail competition is stronger, with new energy entrepreneurs offering consumers more varied products and better priced deals. Gains for consumers are real but at risk because of rising wholesale costs.
  • Network evolution: a new annual monitoring report to assess the state of economic regulation for electricity networks  in the face of energy market transformation, as networks move away from being one-way delivery systems and become managers of multi-directional flows of energy. We published the first annual report in July 2017.

Technology work program

The AEMC has a strong understanding of technological developments in energy products and services, and how they may impact energy markets.

When we make rules, we don’t bet on a single technology. We establish frameworks where all technologies can participate in the market based on their ability to deliver the outcomes that consumers want and value.

Our technology work program identifies barriers to new technologies; asks whether consumer protections need to be changed; and if the right incentives are in place to support investment and innovation.

Rule changes and reviews

Many of our rule changes and reviews drive significant reform in energy market frameworks as the sector transforms. For example:

  • the COAG Energy Council  formally asked the AEMC to directly inform the Council's priorities and work program by providing advice on strategic priorities for the energy sector. 
  • in November 2017 we made a rule to reduce the time interval for settlement  in the wholesale electricity market from 30 minutes to five minutes – a fundamental change to the price calculation. This will align the physical electricity system - which matches demand and supply of electricity - with the price signal provided by the market for that five minute period.
  • in December 2016 new legislation took effect which provides the Australian Energy Regulator (AER) with additional responsibility to monitor and report on wholesale market performance. This follows the AEMC’s recommendation to the COAG Energy Council to give the AER a specific function to monitor the efficient operation of the wholesale electricity market and regularly report on whether the market is workably competitive.

Just as importantly, our business as usual work responds to the more immediate requirements of electricity and gas market participants. These more tactical rule changes – for example clarifying roles, responsibilities, guidelines and reporting requirements, ensure markets can continue to function and energy market institutions can do their job effectively as the market evolves.