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.
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:
- 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.
- 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.
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.
Release 1 of the Customer Insights Collaboration is exploring barriers and enablers to customer reward for flexible DER and energy use. This release is setting an important foundation for the Customer Insights Collaboration, by working through the most pressing customer access, value, communications and trust issues associated with flexible DER and energy use, drawing on the latest insights from Australian and international trials and research .
The ESB is undertaking initial work bringing together the latest Australian and international research on rewarding customers for flexibility. These insights are informing the Release 1 collaboration.
High-level summaries of these insights, as well as the materials and outputs from the stakeholder workshops, are available below.
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.
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 are using the risk tool as part of their reviews of the existing retailer authorisation process.
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:
- Attachment A - three-year horizon of DER Implementation Plan
- Attachment B - customer insights collaboration
- Attachment C - activities for Horizon One
Development of interoperability policy
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 carried out a consultation 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.
- The assessment framework has been prepared for ESB by FTI Consulting and was published as an accompanying document to the ESB consultation.
- Submissions received to the consultation can be found here.
- Materials shared as part of the stakeholder workshop held on 17 February 2022:
As part of the DER Implementation Plan, the Energy Security Board (ESB) has been tasked with developing policy advice regarding what technical foundations are necessary to support the effective integration of smart charging for EVs into the National Electricity Market (NEM).
The ESB’s Electric Vehicle Smart Charging Issues Paper seeks stakeholder views on a range of issues relating to the development of effective arrangements for EV smart charging in both domestic and public settings, including the need for:
- Residential equipment standards and an intention, where possible, to promote alignment across jurisdictions;
- Consideration of international experience / settings to consider how relevant settings could be developed / adapted in the NEM ;
- Interoperability standards – supporting residential interoperability and remotely managed smart charging capabilities; and
- Policy settings that allow for the growth of private investment in public charging.
Stakeholders are invited to register to attend a webinar outlining the reforms explored in the paper on Tuesday 2 August 2022, with submissions on the paper due by 19 August 2022.
The ESB held a stakeholder webinar exploring issues raised in the paper on Tuesday 2 August 2022.
The ESB published the following items on 17 December 2021.
The following items as part of the Customer Insights Collaboration, ahead of collaborative stakeholder workshops commencing in March 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. We received a strong response to the call for evidence, with links to the reports available via the link here. The ESB thanks all those that provided material and research inputs to support this exercise. A draft summary of the review of this research is available here. A final version of the insights will be published as part of a Customer Insights Collaboration knowledge sharing report at the completion of Release One.
- 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.
Stakeholder Steering Group – Release One of the Collaboration
The ESB welcomes the strong interest received from stakeholders across the sector in joining the SSG for Release One. The ESB is pleased to announce members for the first release:
- Janine Rayner, Head of Communications and Policy, Energy and Water Ombudsman (Victoria)
- Mindy Lim, NETCC Manager, Clean Energy Council
- Terry Daly, Director New Energy, Rheem Australia
- Chantelle Bramley, Executive General Manager, Corporate Affairs, Essential Energy
- Matthew Giampiccolo, Senior Regulatory Adviser, Simply Energy
- William Edmonds, Associate, Bloomberg New Energy Finance
- Wendy Miller, Senior Advisor, Energy, QCOSS
- Jordan Tasker, Director, Consumer Projects, Australian Energy Regulator
- Dr John Gardner, Consumers and Resource Use, CSIRO
The ESB would like to thank all those who expressed an interest in joining the SSG. We intend to refresh the membership of the SSG for each six-month release of the Customer Insights Collaboration to support diverse participation and input over the life of the initiative.
The ESB is inviting stakeholders and interested parties to register to participate in Customer Insights Collaboration workshops on the topic of barriers and enablers to customer reward for DER and flexible energy use. The workshops will bring a diverse group of customer, retailer, network, technology, market body, government, clean energy providers and academic stakeholders together to stand in the shoes of customers and generate insights that can feed into the DER Implementation Plan reform activities and inform adjacent policy or regulatory issues more broadly.
The workshops, which will be held virtually for Release One, and include a mix of expert presentations, large and small group discussions, and human-centred design exercises, will run for approximately three hours each. You can register for:
- Workshop 1 - Defining the problem – 23 March 2022 10am-1pm AEDT
- Workshop 2 - Exploring the issues – 13 April 2022 10am-1pm AEST
- Workshop 3 - Synthesising the insights and opportunities – 24 May 2022 10am-1pm AEST
The Knowledge Share Report for Release One was published on 28 July 2022.
The report outlines the approach taken as part of Release One and the insights that have been developed to inform the work of ESB, and others, towards the Post-2025 reforms. It is a record of the engagement undertaken, feedback collated and recommendations that have been proposed by the Stakeholder Steering Group as a result of this process.
This report should be read in conjunction with the rapid evidence review undertaken by ACIL Allen that was a key input for Release.
The insights we have gathered in Release One indicate that there are a set of strategic priorities to unlock the great potential of flexibility:
- Make flexibility inclusive to unlock opportunities for all consumers
- Create incentives and nudges that make flexibility easy and attractive for consumers
- Communicate about flexibility to engage and empower consumers
- Earn energy consumers' trust to engage with flexibility products and services
The Board agrees with the Stakeholder Steering Group’s recommendations that Release Two of the Collaboration should lead by example by working with the DER Implementation Plan project teams to help them apply the insights. The diverse regulatory, technical and market nature of the projects means this work will need to be done in different ways suited to the process and the issues.
The Customer Insights Collaboration is an Energy Security Board (ESB) initiative to bring multiple stakeholder interests together to support building an evidence base of customer insights to inform reforms (and related activities) in the Post 2025 DER Implementation Plan.
The ESB is seeking expressions of interest for the Stakeholder Steering Group (SSG) that will support Release Two of the Customer Insights Collaboration.
In Release Two, the SSG will work with the ESB and the teams across the market bodies leading DER Implementation Plan reforms to explore, interpret and help the project teams apply the insights gathered in Release One.
Interested stakeholders are invited to submit an expression of interest to the ESB using the online application form online application form by 19 July. The ESB will assess applications and engage the SSG ahead of first meeting of the Group in early August 2022.
The ESB in collaboration with market bodies is hosting quarterly check-ins with stakeholders to enable a high-level discussion about the delivery of the DER Implementation Plan. The quarterly check-ins build on the engagement and consultation underway for each reform activity.
The Energy Security Board has published the stakeholder presentation from the first DER Implementation Plan Quarterly check-in, held 31 March 2022.
The Energy Security Board has published the stakeholder presentation from the second DER Implementation Plan Quarterly check-in, held 28 July 2022.
The ESB has set out a range of reform initiatives as part of its integrated DER Implementation Plan, a number of which are already underway and intended to address pressing needs. These include:
Development of technical standards governance: AEMC is currently considering this rule change requested by the ESB. A draft determination is due in December 2021.
Standards for new technologies/devices: providing functionality for ‘active’ DER devices will guide next stage of the Distributed Energy Integration Program (DEIP) work including further definition of DSO network responsibilities. This includes important work on interoperability, enabling devices to communicate with each other so customers can easily switch between providers. Other activities include:
- ESB/market bodies to work with stakeholders to develop policy on electric vehicle charging standards and timing for their introduction.
- ESB is developing policy advice (due to DEIP December 2021) on interoperability to provide direction on technical standards.
- Based on this advice support phased introduction of mandatory technical standards for new inverter based solar PV and battery storage.
- ESB and DEIP to identify related processes needed to enable DER interoperability alongside standards e.g., registration, telemetry data collection and management of identity and access control.
- Development of DER cyber standards with ESB/AEMO to provide scope and need ahead of the Commonwealth DISER standards; AEMO to maintain coordination with DISER and workplan oversight; risk identification via DEIP interoperability workstream.
Addressing system security challenges emerging from low system load conditions:
- Enhanced AEMO information such as: new guidelines to improve knowledge sharing of conditions that contribute to minimum system demand; collaboration with industry to report to the market on minimum system demand conditions; new post-event reports to be associated with market notice mechanisms.
- Turn up capability trials run by AEMO and ARENA exploring ways to help more consumers take advantage of negative and low-price periods by shifting consumption to soak up excess solar generation.
Dynamic operating envelope trials underway in South Australia and Victoria to help develop guidelines on metering configurations, connection agreements and capacity allocation rules for network capacity to maximise what we get out of the existing grid.
Distributed energy resources access and pricing rules were made by the AEMC on 12 August 2021 to make room for more rooftop solar on the grid and embed batteries and other resources more effectively.
Wholesale demand response mechanism, which took effect from October 2021, letting large users trade their energy use. It encourages large consumers to reduce their electricity consumption in response to wholesale market price signals. It works by scheduling this demand into the market in the same way generator supply is scheduled.
Integrating energy storage into the NEM: Draft determination of 15 July 2021 proposes National Electricity Rules updates to accommodate the market participation of new technologies, business models and services. It considers the best ways to implement the ESB’s trader-services model.
Five-minute settlement: changing the financial settlement period for the wholesale electricity spot market from 30 minutes to 5 minutes. Will encourage participation of fast response technologies, such as batteries, fast-start plants and demand response. Five-minute settlement will start on 1 October 2021.
Demand-side portal: introduced by AEMO in 2017 following an AEMC rule change. Continues to evolve with more granular information.
Power of choice reforms: including cost-reflective pricing (introduced through the 2014 Distribution Network Pricing Arrangements rule change which was progressively put in place by 2017) and Competition in metering through the 2014 Expanding competition in metering and related services rule change which took effect on 1 December 2017.
Virtual power plant (VPP) demonstrations: Extended to June 2021 with the number of VPPs and the aggregated VPP capacity continuing to increase.
Victorian distributed energy resources marketplace: A demonstration of the co-ordination and optimisation of aggregated DER in the wholesale market.
ARENA/AEMO demand response RERT trials: Commenced in 2017 and run for three years.
Further background material from ESB Post-2025 Technical Working Groups can be accessed here:
- Presentation to Technical Working Group - DER Integration - 200630
- Presentation to Technical Working Group - DER Integration - 200721
- Presentation to Technical Working Group - DER Integration - 200728
- Presentation to Technical Working Group - Two Sided Markets - 200720
- Presentation to Technical Working Group - Two Sided Markets - 200811
- Presentation to Technical Working Group - Two Sided Markets - 200921
- Presentation to Technical Working Group - Two Sided Markets - 200409