The Australian Energy Market Commission has started consulting on proposed reforms to the treatment of smaller generation – typically solar, wind or hydro assets – in the national electricity market (NEM). 

The AEMC has published a consultation paper on rule change requests that also aim to make the process for registering as a generator in the NEM, and for getting an exemption from this process, more transparent and certain. 

One of these rule change requests relates to generators that are above 5 MW capacity but are below the level required to participate in central dispatch, which is the process where the Australian Energy Market Operator (AEMO) determines every five minutes which generators will supply electricity to meet expected demand. 

By not participating in central dispatch these generators are not required to participate in AEMO’s short term forecasting mechanisms such as the pre-dispatch schedule. This means their actions are not visible to the market in the same way that scheduled of semi-scheduled generators are. These non-scheduled generators are typically renewable in nature and therefore are most often solar, wind or hydro assets. Since 2010, the total capacity of non-scheduled generation in the NEM has increased from 2,645 MW to 3,616 MW.

The first rule change request from the Australian Energy Council concerns both issues: the treatment of smaller generation in the NEM and the transparency and certainty of the generator registration and exemption process.

This rule change request is seeking to increase the participation of smaller generators in central dispatch to improve management of the power system and better enable efficient operation of the market. It also proposes changes to the AEMO’s process for granting exemptions from being registered as a scheduled or semi-scheduled generator.

The aim of broadening the number of generators participating in central dispatch is similar to the objective of the Energy Security Board’s two-sided market design initiative. Broadly speaking, the two-sided market reforms aims to achieve a more efficient balance of supply and demand in the wholesale market and enable all types of energy users to actively buy and sell electricity. In order to achieve this, a greater and more diverse level of participation is needed on both sides of the market — demand and supply. 

This requires consideration of how to change the dispatch and scheduling arrangements and the NEM participation frameworks to make them more flexible and accessible. Therefore, the questions relevant across both this rule change and the two-sided market design initiative include how best to balance the private costs involved in participating in dispatch against the public good that can be realised in having a more efficiently managed system. The consideration of the AEC's rule change proposal will likely be instructive for the broader and longer-term two-sided market reform path. 

The second rule change request from an individual, Mr Damien Vermeer, relates to the second issue of transparency and certainty of the generator registration and exemption process.

Specifically, Mr Vermeer is seeking to minimise uncertainty in the registration and connection process for embedded generators (those connected to the distribution system rather than the transmission system) by granting them with a conditional exemption from registration if they are between 5MW and 30MW in size. Universities, warehouses, airports, hospitals and industrial facilities are among the types of facilities that have embedded generators.

The Commission has commenced consultation of these two rule change requests together as they both take issue with the transparency and certainty of the generator registration and exemption process. Consulting on them together will streamline the consultation process for stakeholders and will facilitate more integrated and consistent decision-making.

Submissions close on Thursday 17 December 2020. 

Media: Kellie Bisset, Media and Content Manager, 0438 490 041