Final determination on the Demand Response Mechanism and Ancillary Services Unbundling rule change

24 November 2016

Final determination on Demand Response Mechanism and Ancillary Services Unbundling
 
The AEMC has made a rule, which is a more preferable rule, to create a new type of market participant who can do deals with energy users to offer demand response as a tool to help maintain power system security. 
The final rule allows for the ‘unbundling’ of the provision of the ancillary services necessary for a secure power system from the provision of energy. This will facilitate a more competitive ancillary services market by enabling a more diverse group of suppliers to provide frequency control ancillary services (FCAS) at more efficient FCAS prices. 
 
The new arrangements will start from 1 July 2017.
 
The final determination does not create a new regulatory mechanism for demand response in the National Electricity Market as this would unnecessarily increase costs for consumers while not necessarily unlocking any additional benefits for customers over and above what currently does, and can, take place in the market.
 
The AEMC’s analysis found that there are no barriers in the National Electricity Rules to demand side participation. The benefits identified in the rule change proposal can be delivered without the extensive costs of a new regulatory mechanism, which could be as much as $120m.
 
Market developments and innovation by demand side management providers means large customers, retailers and network businesses can already enter commercial arrangements directly with one another or access a relatively competitive demand-side market.  
 
At least 21 businesses are providing a variety of products and services across all major jurisdictions in the National Electricity Market. Retailers and demand-side service providers expect this to increase in the future.
In addition, the ability of consumers to exercise their demand response is likely to increase as the latest market reforms started by the Power of Choice review start to take effect throughout 2017. These reforms include new distribution network pricing arrangements allowing for greater use of pricing structures and new metering services so consumers can access products that value their demand response.