Rule Change: Completed
On 31 August 2018 the AEMC received a rule change request from the Public Interest Advocacy Centre (PIAC), Total Environment Centre (TEC) and the Australia Institute (TAI) seeking to introduce a mechanism for wholesale demand response in the national electricity market.
It is one of three rule change requests that the Commission received that relate to wholesale demand response. The other requests are:
- On 18 October 2018 the Australian Energy Council (AEC) submitted a rule change request seeking to introduce a register for wholesale demand response.
- On 21 October 2018 the South Australian Government submitted a rule change request seeking to introduce a mechanism for wholesale demand response. It also proposed to introduce a separate, transitory market for wholesale demand response.
On 11 June 2020, the AEMC released a final rule and final determination to implement a wholesale demand response mechanism.
On 11 June 2020, AEMO also published a high-level design to assist stakeholders in understanding the implementation of the wholesale demand response mechanism.
This final determination sets out a series of changes to the NER to facilitate wholesale demand response in the national electricity market (NEM), principally through implementing a wholesale demand response mechanism.
This represents a significant reform for the NEM. Under this rule, consumers would be able to sell demand response in the wholesale market either directly or through specialist aggregators for the first time.
Under the final rule, a new category of registered participant, a demand response service provider (DRSP), will be able to bid demand response directly into the wholesale market as a substitute for generation. A DRSP can also engage directly with a customer without the involvement of that customer’s retailer.
The mechanism introduced under the final rule is designed to provide greater opportunities for consumers to participate in the wholesale market by bidding in demand reductions as a substitute for generation, thereby unlocking under-utilised demand response in the national electricity market (NEM). The mechanism will promote greater demand side transparency, as well as price and reliability- related benefits.
In the longer term, the Commission considers that moving to a two-sided market will assist the NEM in effectively evolving and transitioning to the future power sector, whatever that future may look like. A two-sided market is characterised by the active participation of the supply and demand side in dispatch and price setting. Moving to a two-sided market should enable the transition to a future NEM characterised by increased variable supply and more flexible, price responsive demand.
The Commission has determined to not make a retail rule in response to the rule change requests.
Second draft determination
On 12 March 2020, the AEMC released a second draft determination and draft rule to implement a wholesale demand response mechanism.
This second draft determination followed an extension for the time for making a final determination. On 5 December 2019 the Commission extended the time for making a final determination until 11 June 2020 under section 107 of the National Electricity Law (NEL) and section 266 of the National Electricity Retail Law (NERL). This extension followed the provision of supplementary information by the market operator, AEMO, on implementing the proposed mechanism. It also follows a COAG Energy Council request for advice on the introduction of a two-sided market to the ESB, which includes the AEMC.
Submissions on the second draft determination and draft rule closed on 23 April 2020. 26 submissions were received and are available below.
First draft determination
On 18 July 2019 the AEMC released a draft determination to implement a wholesale demand response mechanism.
Submissions on the draft determination closed on 12 September 2019. 38 submissions were received and are available below.
In preparing the final determination, the Commission:
- held a stakeholder workshop on 5 March 2019 in Melbourne to discuss the rule change requests. The workshop agenda and slides from the workshop are available below.
- held three technical working group meetings attended by experts from industry, demand response providers and consumer groups. The group provided technical input into the development and assessment of the rule change requests. The discussion notes from these meetings can be found below.
The AEMC received two requests, from ENGIE and SIMEC Energy, to hold a pre-final rule determination hearing in relation to the draft determination. The hearing was held on 6 August 2019. A transcript of the hearing, and associated materials, are available below.
The Commission also held two stakeholder consultation workshops on the draft determination on 16 August and 22 August 2019. The discussion notes and agendas for both workshops can be found below.
Technical working group
The AEMC formed a technical working group of experts from consumer groups, large consumers, network businesses, retailers, technology providers, market bodies and AEMO to consult on the proposed rule changes.
The AEMC has held five technical working group meetings:
- 22 March 2019
- 15 April 2019
- 30 May 2019
- 11 October 2019
- 8 April 2020.
The discussion notes from these meetings can be found below.
First extension and consolidation
On 7 February 2019 the Commission extended the period of time for making the draft determination to 18 July 2019 under section 107 of the NEL and section 266 of the NERL. On 10 October 2019 the Commission extended the time for making the final determination by an additional three weeks due to complexity and the volume of issues raised by stakeholders in submissions in relation to how the rule is put in place in the regulatory framework.
Alongside the draft rule and draft determination, the Commission also published two consolidation notices on 18 July 2019:
- The first notice related to the consolidation of ERC0247, ERC0248 and ERC0250. The three electricity rule change requests are consolidated under ERC0247 and named Wholesale demand response mechanism.
- The second notice related to the consolidation of RRC0023, RRC0025 and RRC0027. These three retail rule change requests are consolidated under RRC0023 and named Wholesale demand response mechanism - retail.
Note: As a result of the making of the National Electricity Amendment (Removal of intervention hierarchy) Rule 2020 No. 14, Item  of Schedule 3 of the National Electricity Amendment (Wholesale demand response mechanism) Rule 2020 No. 9 has been deleted.