Come on down: the new Price is Right

The Australian Energy Market Commission (AEMC) has started consultation on three rule change requests to make changes to the regulatory framework to help integrate more distributed energy resources (DER), such as rooftop solar and batteries, in a way that benefits all electricity users.

These rule change requests are a result of extensive collaborative work undertaken through the Australian Renewable Energy Agency (ARENA) led distributed energy integration program (DEIP) initiative.

What is DEIP?

Following the AEMC’s 2019 electricity network economic regulatory framework review, the DEIP initiative brings together energy peak bodies, market authorities, industry associations and consumer advocates and is aimed at maximising the value of DER for all energy users. The program includes four distinct work packages, including:

1. DER Access and Pricing,
2. DER Interoperability (Data, Communications & Cyber Security),
3. DER Market Development, and
4. Electric Vehicles.

The DER Access and Pricing work package explores how the regulatory framework can evolve to meet changing community expectations about DER. The work package has comprised a series of stakeholder workshops and several reports. Rule change proposals relating to DER access and pricing were anticipated following the release of the June 2020 DEIP Access and Pricing Reform Package Outcomes Report.

Rule change requests

In July 2020, the AEMC received three rule change requests from the Total Environment Centre and Australian Council of Social Services (TEC and ACOSS), SA Power Networks (SAPN), and St. Vincent de Paul Society relating to DER access and pricing.

The joint TEC and ACOSS request proposes changes to the framework for network planning, investment and access. It seeks to create obligations and incentives for network businesses to optimise existing, or invest in additional, DER hosting capacity, while also improving access to the grid for consumers who also produce energy (known as prosumers). TEC and ACOSS foreshadow a possible subsequent rule change process that would introduce two-way import and export pricing.

The SAPN request also seeks to address issues in relation to DER access and pricing arrangements and the regulatory investment and incentive framework, but with a view to minimising changes to current regulations. SAPN consider that networks should be required to meet customer demand for DER export capacity and that where customers have a willingness to pay for a given export capacity and level of service, regulation should not deny customers from requesting that service from their distribution network service provider.

The St. Vincent de Paul Society request proposes reform to the distribution pricing arrangements to continue to facilitate the increased take-up of DER technologies by consumers.

Why is reform required?

The energy exported by customers’ rooftop solar and other distributed energy resources is an increasingly significant part of Australia’s energy mix.

In recent years, Australia’s small-scale renewable generation capacity has grown significantly and is now equivalent to about 20 per cent of the National Electricity Market’s total capacity.[i]  Households have been the main driver of small scale renewable investment, and some one-quarter of dwellings are now fitted with rooftop solar panels.[ii]

For electricity networks, the ability to host DER is, therefore, becoming as important as their traditional role delivering energy to end-users. However, the electricity grid, and associated national regulatory framework, was not designed for two‑way flows of electricity and the capacity of the grid to accept that energy is not unlimited.

Energy Networks Australia is strongly supportive of the review being undertaken by the Australian Energy Market Commission. We can’t run a 21st-century power grid with 19th-century pricing structures. A reformed and clear regulatory framework recognising that networks are being asked to cater for the two‑way flow of energy is essential. This will enable customers to maximise the value of their investment in DER while minimising the cost to them of hosting DER on the shared electricity network.

Next steps

The AEMC is encouraging stakeholders to provide feedback on its consultation paper, with submissions due 10 September 2020. A virtual public forum will be held on 13 August 2020 as part of the AEMC’s consultation on the rule change requests.

Network businesses are strongly supporting the national transition to distributed energy. We want to continue to enable customers who invest in DER to have choices and be rewarded for the benefits their exports may provide. Getting the regulatory framework right to support this transition is key to delivering benefits to all.

References

[i] Reserve Bank of Australia, Bulletin – March 2020: Renewable Energy Investment in Australia, 19 March 2020.

[ii] Reserve Bank of Australia, Bulletin – March 2020: Renewable Energy Investment in Australia, 19 March 2020.