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 security is being addressed through:

  • our system security review
  • gas market changes to support system security
  • 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 review

Our system security review is addressing fundamental questions raised by the technological revolution underway in the national power system.

A range of mechanisms are available to provide the additional services that are required to manage changes in power system frequency caused by increasing non-synchronous generation like wind and solar. These mechanisms are being examined in the review, along with related rule change requests.

In March 2017 we published a directions paper recommending mechanisms to facilitate the ability of the power system to accommodate new technologies. A final report is due in June 2017.

We are also considering a number of rule changes relevant to system security including requests relating to the rate of change of frequency and system strength.

On 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.

Learn more about the AEMC’s system security work program.

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 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 published the draft report for its annual review of the performance of the power system. Also in March, the Panel started its four yearly review of the reliability standard and settings.

Effective integration of emissions reduction policy

In December 2016 the AEMC advised the COAG Energy Council on potential mechanisms to reduce emissions  in the electricity sector in line with Australia’s Paris accord commitments. The AEMC supports a mechanism that achieves the emissions reduction target chosen by government, while minimising consumer costs and impacts on system security and reliability.

We will also contribute to the federal government’s 2017 review of climate change policies.

In April 2017 the Minister for Environment and Energy asked the AEMC to provide advice on policies to enhance power system security and to reduce electricity prices consistent with achieving Australia’s emission reduction targets in the Paris Agreement. The review will be done jointly with the Climate Change Authority and is due for completion by 1 June 2017.

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. The review is likely to start in mid 2017.

Finkel review

We are contributing 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.

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 the generation mix, interconnectors and the large-scale renewable energy target (LRET) are affecting wholesale prices.

  • 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. The 2016 review found competition is growing and technological advances are introducing new energy services. This is allowing consumers to shop around and choose how their energy is sourced and used. The next review will be published on 30 June 2017.
  • 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 will publish the 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 has formally asked the AEMC to directly inform the Council's priorities and work program by providing advice on strategic priorities for the energy sector. We will deliver our advice to the council in October every three years, starting this year.
  • we are considering a rule change request 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 would provide a greater incentive for investment in fast response services, including battery storage and demand response schemes, which can respond to short term fluctuations in energy supply and demand.

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.