Distribution Market Model Final Report

22 August 2017

Helping consumers get more value from rooftop solar, batteries and energy saving appliances

In a final report released today, the Australian Energy Market Commission has outlined a vision for a competitive ‘distribution market’ which enables consumers to get the most value out of their rooftop solar panels, batteries and other distributed energy resources as we move to a lower emissions future.

AEMC Chairman John Pierce said that if, as expected, distributed energy resources continue to become smarter and cheaper, we will see an acceleration in consumer uptake.

“We need to put consumers in the driving seat – giving them the choice about how to optimise the value of their household’s or business’s energy investments,” said Mr Pierce.

Distributed energy resources include a range of technologies, such as battery storage, electric vehicles and smart household appliances like refrigerators and dishwashers, which are connected to the electricity distribution network.

These resources can provide services to different parts of the electricity market. For example they can:

  • help consumers reduce electricity bills
  • help electricity networks manage peaks in demand
  • compete in the wholesale electricity market by exporting electricity
  • help consumers trade energy with their neighbours

Currently consumers may be able to benefit from only one or two of these revenue streams at a time. The report sets out a future where consumers can buy and sell energy and related services at the distribution level in a more dynamic way – choosing from all the various revenue streams – in response to price signals and their own preferences.

To achieve this vision, some essential changes to energy markets are already underway. This includes the introduction of a competitive market for smart meters and the move to cost reflective tariffs, which provide consumers with more accurate price signals on investing in, and using, distributed energy resources.

But it is a longer term vision and the AEMC has also identified the need for a number of ‘enablers’.

In particular, there needs to be better co-ordination between distribution level markets and the wholesale market to broaden the opportunities for distributed energy resources. This is currently being looked at in the AEMC’s Reliability Frameworks Review but the creation of a distribution level market will also be key part of that co-ordination in the longer term.

“Distributed energy technologies can provide benefits to consumers, networks and wholesale markets. We need a way to allow consumers and their retail energy service providers to determine where they can get the most value at any point in time,” said Mr Pierce.

“Also, more investment in fast response and flexible distributed technologies can make the power system more secure and reliable. These technologies can back up the system when the wind stops blowing and the sun stops shining.”

To underpin a competitive distribution market, the AEMC has made a number of findings for implementation including

  • understanding the level of control network businesses need to have over distributed energy resources to maintain system safety, reliability and security
  • obtaining more dynamic information about congestion and technical issues on networks, at more localised levels, so all market participants can spot opportunities and make better decisions on how to invest in, and operate, distributed energy resources
  • considering if the current access model for distributed energy resources to use the network is appropriate, if networks become congested as more resources connect
  • establishing more transparent and standardised processes for connecting distributed energy resources, to avoid onerous technical requirements which can increase costs, or loose requirements which can create safety issues
  • developing fit-for-purpose Australian Standards for distributed energy resources, which could include setting up an electricity sector-specific body to develop those standards. 

Purpose of the report

This project is part of the AEMC’s technology work program. The report will be used to help inform the AEMC’s analysis of rule changes submitted by stakeholders in response to emerging issues, and our advice to governments.

The report builds on the analysis undertaken by other projects in the technology work program, including the Integration of Storage report. It is also consistent with the AEMC’s 2015 Strategic Priorities, specifically related to network transformation, and is expected to feature in the Commission’s 2017 Strategic Priorities advice to the COAG Energy Council.

Media: Prudence Anderson, 0404 821 935 or (02) 8296 7817

22 August 2017