Consumers who choose to go off-grid will find it easier, safer and more reliable under reforms proposed today in a final report by the Australian Energy Market Commission (AEMC).

The AEMC has set out a new framework that will require community groups, local councils, developers and other third party providers of stand-alone power systems to comply with jurisdictional regulations on reliability, safety and consumer protections, based on nationally agreed principles.

Microgrids and other types of off-grid power systems are becoming more viable options for some customers as the cost of technologies like rooftop solar and batteries continue to decline. While consumers can currently choose to go off-grid, in most cases they have very limited consumer protections.

The changes would enable those living in remote locations without easy access to the grid, or who wish to disconnect from the grid, to choose an off-grid solution while still having consumer protections in place for things like billing arrangements, reliability and safety standards.

The AEMC has recommended a tiered framework that provides appropriate consumer protections while avoiding unnecessary costs, rather than a one-size-fits-all approach.

The framework includes two main categories of systems:

• larger microgrids supplying anything from more than a few customers to many hundreds of customers, for example a microgrid supplying a small regional town, or a microgrid supplying a small isolated community
• smaller microgrids supplying a few customers, or supplying only large commercial and industrial customers, or an individual power system where there is a sale of energy. For example, a microgrid connecting two farms, or an individual power system where a retailer provides the system to a customer in return for an ongoing charge.

For larger microgrids, jurisdictions would develop comprehensive regulations covering registration and licensing, obligations to supply and connect, pricing, consumer protections including for vulnerable customers, and reliability and safety standards. These bespoke regulations would fit the local circumstances but be based on national principles to minimise compliance costs for parties with operations in more than one state.

For smaller microgrids, lighter-touch regulation would apply with jurisdictions setting some minimum consumer protections, such as billing requirements, as well as basic requirements for safety, metering and technical standards.

The AEMC has also considered a situation where a microgrid is large enough to support effective competition in generation and retail. Although no such systems exist currently or appear likely to in the foreseeable future, we have recommended any very large microgrids be subject to a coverage test and, if warranted, regulated by the Australian Energy Regulator in the same way as distribution network businesses.

The AEMC has set out an implementation plan for the new framework, including the key changes that jurisdictional governments and regulators will need to make.

The final report, including recommendations and implementation plan, is now with the COAG Energy Council for consideration.

Today’s report is part two in a complete re-design of regulations for stand-alone power systems.

Part one was published on 30 May 2019 and sets out a pathway to enable network businesses to transition remote customers to stand-alone power systems where it is cheaper than maintaining a connection to the grid, while providing customers with the same protections, reliability standards and their choice of retailer. This can reduce costs for all energy consumers by avoiding expensive investment in poles and wires where customer numbers are limited.

The COAG Energy Council's Senior Committee of Officials has established a working group to progress recommendations from part one of the review. In addition, we have started developing advice for governments on the required rule changes.

This work is part of our broader consumer action plan.

Media: Prudence Anderson, Communication Director, 0404 821 935 or (02) 8296 7817

BACKGROUND

What is a stand-alone power system?

A stand-alone power system is an electricity supply arrangement that is not physically connected to the national grid. The term encompasses both microgrids and individual power systems:

• Microgrids: any system supplying multiple customers not physically connected to the grid. Includes anything from a large town to two farms connected to each other. Generation sources typically include solar PV, wind turbines and small scale gas generators and diesel engines.
• Individual power systems: a system supplying an individual customer not connected to the national grid or a microgrid. Typically includes a combination of solar PV, batteries and a back up generator.

Why has the AEMC done this review?

Stand-alone power systems are generally not captured under the national electricity frameworks. Regulated distribution network service providers are currently prohibited from offering them to customers in most states and territories. If customers obtain their own supply using a stand-alone power system, those systems are subject to jurisdictional legislative frameworks that vary in their comprehensiveness. 

Under the terms of reference for the review provided by the COAG Energy Council, the Commission has considered two priority areas:

• Part 1 focussed on the development of a national framework for customers that move from grid-connected supply to stand alone power systems provided by existing distribution network service providers. A final report was published on 30 May 2019 that set out a pathway to enable network businesses to transition remote customers to stand-alone power systems where it is cheaper than maintaining a connection to the grid, while providing customers with the same protections, reliability standards and their choice of retailer.
• Part 2 (this report) considered regulatory frameworks for the provision of stand-alone power systems by parties other than distribution network service providers.

Who are the market bodies?

AEMC - Australian Energy Market Commission is the rule maker, market developer and expert adviser to governments. It protects consumers and achieves the right trade-off between cost, reliability and security.

AEMO - Australian Energy Market Operator is the electricity and gas systems and market operator. It works with industry to keep the lights on.

AER - Australian Energy Regulator is the economic regulator in charge of rules compliance. It policies the system and monitors the market.