The annual Grid of the future review of the economic regulatory framework for electricity networks is part of the AEMC’s work to support the continual evolution of the energy sector. In light of the significant growth in distributed energy resources, the review examines whether the economic regulatory framework is robust, flexible and continues to support the efficient operation of the energy market in the long term interests of consumers. 

For the 2019 review, the AEMC consulted on two separate workstreams and published two reports on 26 September 2019 

Workstream one: integration of distributed energy resources

This workstream is part of the AEMC’s ongoing program to support the continual evolution of the energy sector. 

On an annual basis and under terms of reference from the COAG Energy Council, the Commission monitors key trends in grid usage as well as development and uptake of new technologies and business models.

The focus of the 2019 review is the integration of distributed energy resources into the energy market system, which is one of our strategic priority areas of reform. 

In this year’s report, the Commission sets out a range of options to create more dynamic markets and manage network challenges created by increasing penetration rates of distributed energy resources. We highlight work that is already underway to implement distributed energy resources effectively, what we are planning to do next and whether we see any gaps.

View our webcast about the final report. 

As a first step, the AEMC will be consulting with stakeholders on reforms to distribution access and charging arrangements through a series of workshops held jointly with ARENA and consumer groups as part of the Distributed Energy Integration Program.

We will track progress with all of the recommendations through our Grid of the future work plan. 

Workstream two: regulatory sandboxes

On 26 September 2019 the AEMC published a final report recommending the introduction of a regulatory sandbox toolkit in the national energy market to make it easier for businesses to develop and trial innovative energy technologies and business models.

A regulatory sandbox is a framework within which participants can trial innovative concepts in the market under relaxed regulatory requirements at a smaller scale, on a time-limited basis and with appropriate safeguards in place.

Innovation in the energy sector can lead to better services and lower costs for consumers.  It is important that the regulatory framework supports emerging technologies and business models that have the potential to deliver these benefits to consumers. 

The AEMC has recommended three new sandbox tools to facilitate trials:

• an innovation enquiry service, to provide guidance and feedback and help businesses get trials up and running quickly where they are feasible under current laws and regulation
• a new regulatory waiver power for the Australian Energy Regulator (AER) so they can temporarily exempt trials from existing rules where this is creating a barrier
• a new AEMC trial rule change process that can temporarily change existing rules or temporarily introduce a new rule of limited application to allow a trial to go ahead.

These three new tools are designed to make it quicker and easier to undertake trials while still providing appropriate consumer protections.

The Commission collaborated with the AER, the Australian Energy Market Operator (AEMO), the Australian Renewable Energy Agency and Energy Consumers Australia to develop the final report and recommendations.

Implementing the toolkit

The innovation enquiry service can be operated within the existing regulatory framework, therefore no changes to the energy laws or rules are required to implement the first tool. The AER will be responsible for its implementation including determining when the service will be launched and resourcing requirements.

Implementation of the second and third sandbox tools – the new regulatory waiver and trial rule change tools - will require a package of changes to the national energy laws and rules to be implemented.

The AEMC has prepared recommended drafting instructions for amendments to the national energy laws (see Appendix A of the final report). The AEMC has also provided initial drafting for changes to the national energy rules to give effect to the toolkit. These can be found in a separate document published with the report.

The final report sets out potential pathways to progress the law and rule changes, for the COAG Energy Council to consider.

Background

As part of the 2019 Electricity network economic regulatory framework review, the COAG Energy Council requested the AEMC to examine regulatory sandbox arrangements and how to best facilitate coordination of proof-of-concept trials.