The AEMC has proposed to open up the wholesale electricity market so consumers can be more easily paid for reducing their demand on the power system. The wholesale demand response mechanism draft rule is in response to requests received from the Total Environment Centre, The Australia Institute and the Public Interest Advocacy Centre; the Australian Energy Council and the South Australian Government.

The Commission has extended the time for making a final determination for the Wholesale demand response mechanism rule change request until 11 June 2020, with an expected second draft determination to be released in March 2020.

This extension follows the provision of supplementary information by the market operator, AEMO, on implementing the proposed mechanism. AEMO’s analysis found that the initial cost estimates for the mechanism range between $40m - $95m, and that some of these features and systems would run the risk of being redundant or requiring significant modification in a transition to a two-sided market.

With this additional information, we will undertake further work with AEMO and other stakeholders to develop and consider a mechanism for wholesale demand response that could minimise costs and be implemented earlier than the mechanism currently proposed. Preliminary work with AEMO indicates that implementation of a such a mechanism could be brought forward to mid 2021 rather than the previously planned mid 2022.

This would be an interim measure ahead of a move to a two-sided market.

In parallel, we will work with the Energy Security Board, AER and AEMO to develop a high-level design for a two-sided marketplace, to be delivered to the COAG Energy Council in March 2020 as a priority. This work will explore the ways digitalisation can enable consumer demand to interact directly with supply to set real-time prices.

A truly two-sided market would give both large and small customers access to participate in the wholesale market in a timely and cost-effective way.   A move towards a two-sided market that actively engages load may require some form of ahead feature and this will be also be considered as part of this parallel work.

AEMC Chairman John Pierce said the Commission remains focused on building a demand response framework to better manage demand so we can stretch supply further.

“How much demand response enters the market will be a function of how attractive it is for consumers to participate, and the type of new technology they embrace.

“We are taking this additional information from AEMO  to look at how we can broaden participation in demand response and bring forward the cost effective and enduring creation of a truly two-sided market,” said Mr Pierce.

Energy Security Board Chair Kerry Schott said: “The ESB welcomes the work the market bodies will be undertaking on a two-sided and ahead market. Those changes, like demand response, that require major system changes should be coordinated and done cost effectively across the market.”

AEMO Managing Director and CEO Audrey Zibelman said “AEMO supports the role of demand side resources in markets as a critical reform to facilitate efficient outcomes for energy consumers.

“Australia is leading the world in consumer adoption of roof-top solar. We can expect this trend to continue as battery storage and other consumer-based energy resources, such as localised fuel cells and electric vehicles, enter the economy,” Ms Zibelman said.

“Through a practical and timely transition, starting with traditional demand response, to a market that provides easy access for all of these resources, we will make the system more secure, resilient, and cost effective for everyone,” she said.

Australian Energy Regulator Chair Clare Savage said: “A wholesale demand response mechanism, as a step towards a genuine two-sided market, is a critical piece of market reform that we must get right if consumers are to pay no more than necessary for safe and reliable power. The AER appreciates the opportunity to work with our fellow market bodies to ensure this reform is delivered as quickly and cost-effectively as possible.”

Mr Pierce noted the extensive input from many stakeholders on this rule change proposal.

“Stakeholders have given their time to attend public forums, make submissions and participate in the project’s technical working group,” said Mr Pierce.

“We will continue to provide stakeholders with an opportunity to provide input on this important reform as we progress towards a final determination in 2020.”

Media: Kellie Bisset, Media and Content Manager 0438 490 041 (02) 8296 7813