Integration of distributed energy resources (DER) and flexible demand

Australians have embraced distributed small-scale energy resources, such as rooftop solar and home batteries, and three million, or one in four, homes now have solar. These resources have drastically changed the dynamic of how the market works, from a few large generators sending power to households in the 1990s, to now, where many households are generating their own power and exporting the surplus back to the grid. Making sure we effectively integrate these distributed energy resources (DER) and flexible demand is key to the future of the NEM. Among other benefits, these reforms will ensure consumers can make the most from Australia’s world-leading rooftop solar uptake. For manufacturing businesses with the capability to dial up their processes and increase their electricity demand would not only benefit from low prices but provide a valuable service for the system during times of the day when solar energy is plentiful. The DER Implementation Plan is key to this work and outlines a path forward for reforms that will support the grid and deliver better outcomes for customers and businesses.

The challenge

By 2030, AEMO expects around 50 per cent of consumers, including large businesses, to use some form of distributed energy resources to participate in the demand side of the national electricity market. There are enormous opportunities arising from the way Australians have embraced solar on their rooftops, smart appliances and, increasingly, batteries and electric vehicles.

Investments in rooftop solar, batteries and smart appliances can not only lower consumers’ bills but also provide them with new levels of control over their energy use. For households this flexibility can mean improved convenience and comfort, while for businesses more flexibility can mean greater productivity or a way to electrify their processes. Moreover, these benefits can help lower system costs for all consumers – not only those with rooftop solar.

However, most solar PV on rooftops today is ‘passive’, meaning it cannot change its output up or down in response to signals. This makes it harder for AEMO to balance supply and demand minute by minute as it operates the system and maintains a secure and stable grid, and also means customers cannot easily provide and be rewarded for flexibility for turning output up or down.

The Post-2025 reforms seek to unlock the full potential of distributed energy through arrangements that reward customers with flexible demand for responding to market conditions. Increasing information and signals to the market will help us to get more value for customers from distributed energy resources and keep the system safe and stable so everyone can use energy the way they want to. Importantly, the Post 2025 reforms include measures to address some immediate technical challenges to keep the system secure as we transition to this flexible, rewards-based future.

What we’re doing

The Energy Ministers have signed off on reforms that will support and grow new choices and capabilities.

Australian households and businesses are investing in solar panels and other energy technologies for a range of reasons: they want to reduce their bills, manage their energy use, or to do their bit for the environment.

The intent of the reforms is to build a grid where customers can continue to meet their primary household and business needs as energy users, benefitting from an increasingly sophisticated array of services and, at the same time, use their assets to create value across the system for everyone.

With the right technical and security settings, digital advances can enable homes appliances, business equipment and systems to talk to each other securely to allow consumers to shift consumption to when it’s cheaper; sell power back to the grid when it’s needed; or turn on their own panels and storage, and not buy grid power at all.

We will need high levels of understanding, trust, and cooperation to achieve these goals and that’s why we need to work together in new ways to deliver the reforms.

The detailed technical, regulatory activities that will be delivered over the next three years are set out in the DER Implementation Plan. These are being led by the market bodies and agencies who are best placed to progress each reform. They will work through the existing National Electricity Market review, rule, and other change processes. This means that stakeholders will be able to participate in the detailed design and implementation of the reforms through established consultation and existing engagement mechanisms.

The Plan addresses two broad agendas:

  1. It delivers new ways to trade through:
  • Flexible trading arrangements that will separate manageable generation and load from the uncontrollable energy supply to a home or business. This removes barriers and makes it easier for smaller players to engage with the market.
  • Trader services reform that will cut red tape by creating a single universal registration category for all entities who want to do business in wholesale energy and services.
  • Scheduled lite reform that will encourage smaller players like aggregators managing direct load control; or local community batteries; to voluntarily give information on decentralised generation size, availability, and operation to AEMO so it can safely and efficiently ensure supply and demand is balanced.

 

  1. It supports change with technical and process reforms through:
  • Consumer protections that will be fit-for-purpose so consumers can safely try different products and switch providers if they want to.
  • Technical settings that will change in the background out of sight, but when consumers decide to change the way they use energy they will be able to do so – simply, safely and securely.
  • Evolved roles and responsibilities that will be introduced for traders (aggregators/retailers), distribution networks, and the system and market operator.

Overall, it aims to:

  • Reward consumers for their flexible demand and generation, provide options for how they want to engage with the energy market, and provide a fit-for-purpose consumer protections framework.
  • Support energy market innovation, allow for the integration of new business models and provide a more efficient supply and demand balance.
  • Allow networks to accommodate the continued uptake of DER and two-way flows and enable them to manage the network’s security in a cost-effective way.
  • Provide the system operator with the visibility and tools it needs to continue to operate a safe, secure and reliable system.

The Plan sequences the work over three horizons: Now, Next and Future. A summary of these reform activities can be found here.

It is critical that the reforms deliver products, services and systems that work for customers, and respond to their evolving needs and expectations in a fast-moving market. That is why the Plan is supported by the Customer Insights Collaboration, which will work with stakeholders to generate customer insights to guide the reform activities.

How we are delivering for customers

The Customer Insights Collaboration will draw on diverse stakeholder perspectives, and the latest market research, to shed light on practical customer issues that need to be addressed to achieve the objectives of the reform, such as: improving access to DER; maximising control and convenience; and ensuring protections are there for when things go wrong.

Stakeholders can participate in a range of ways: they can attend open workshops, contribute research insights, or apply to be a part of rotating steering groups that will guide work on priority issues in each six-month block of work.

The insights from the collaborative workshops are captured in knowledge sharing reports published for each release, along with the research inputs and other materials that support the process. These will provide an important evidence-base for the activities across the DER Implementation Plan. 

What will Release 1 cover?

Release 1 of the Customer Insights Collaboration will explore flexibility from a customer perspective. This will include how rewards for responding to market conditions can be structured. It will also identify the most important barriers to households and businesses benefiting from new opportunities. This release sets an important foundation for the Customer Insights Collaboration, by working through the most pressing customer issues that are emerging in Horizon 1 and exploring ways latest insights from Australian and international trials and research can shape design.

Workshops are scheduled, in February, April and May 2022

The ESB is undertaking initial work bringing together the latest Australian and international research on rewarding customers for flexibility. These insights will inform the Release 1 collaboration.

The intention is to publish these insights ahead of the first workshop in February 2022 where participants will explore a problem definition and focus areas for the collaboration. 

Release 1 follows a pilot collaborative process the ESB facilitated during the development of the Post 2025 Market Design advice to generate critical insights and test this new way of working with stakeholders. The pilot explored the challenge of minimum system load. The Knowledge Sharing Report from the trial is available here.

How will customers be protected?

As new retail offers start to become available to customers, foundations need to be in place to ensure customers can easily and safely make choices and switch between DER and non-DER service providers. A key enabler to the success of the DER Implementation Plan is to ensure that consumer trust is developed in new services and products. The ESB therefore worked with market bodies to develop a new risk assessment tool that they can use to test new service propositions on an iterative and ongoing basis as part of monitoring whether the customer protections in place remain fit for purpose. This tool is publicly available and is also a useful resource for energy service providers wishing to inform the design of new products and services.

Under Horizon 1 of the DER Implementation Plan, the Australian Energy Regulator and the Australian Energy Market Commission will be using the risk tool as part of their reviews of the existing retailer authorisation process.

Where to next?

The ESB published the following items on 17 December 2021.

A Scope of Works for delivery of reform activities in the DER Implementation Plan over Horizon One (2022). This is intended to:

  • Provide stakeholders with more clarity about the approach that we intend to use to give effect to National Cabinet's decision to deliver the DER Implementation Plan,
  • Provide clarity on the lead agency for each of the reform activities over Horizon One (2022) and what are key milestones or next steps for each activity.

You can also download the following related documents:

The following items as part of the Customer Insights Collaboration, ahead of collaborative stakeholder workshops commencing in late February 2022:

  • a call for evidence about barriers to customers being rewarded for DER and flexible energy use to inform a knowledge sharing report about insights from industry trials, customer and industry research, and other sources.
  • an invitation to express an interest in being a member of the Stakeholder Steering Group that will help guide the collaboration and work through the insights that are revealed as part of Release One. 
  • Submissions are due by 24 January 2022.

The following papers to support development of an Interoperability policy framework: 

To support customers to easily switch between DER service providers, and to get the most value from their DER assets, a degree of 'interoperability' will be needed between DER devices and supporting systems and process interfaces.

  • The ESB is seeking stakeholder views on an assessment framework to inform consideration of the trade-offs involved in applying relevant technical standards relating to inverter based DER devices. Submissions are due by 3 February 2022.
  • The assessment framework has been prepared for ESB by FTI Consulting and is published as an accompanying document to the ESB consultation.

A stakeholder workshop will be held on 17 February 2022 at 10-12pm. AEDT, and interest can be registered by email to info@esb.org.au

You can also download the call for Expressions of Interest in Stakeholder Steering Group.