Market Review: Open

Overview

The annual review of the economic regulatory framework for electricity networks is part of the AEMC’s work to support the continual evolution of the energy sector.
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The annual review of the economic regulatory framework for electricity networks is part of the AEMC’s work to support the continual evolution of the energy sector. In light of the significant growth in decentralised energy resources, the review examines whether the economic regulatory framework is robust, flexible and continues to support the efficient operation of the energy market in the long term interest of consumers. 

For the 2019 review the AEMC will be consulting on two separate workstreams and will include advice and recommendations for both in the final report. 

Workstream one: network incentives and market development

This workstream is part of the AEMC’s ongoing program to support the continual evolution of the energy sector. 

On an annual basis and under terms of reference from the COAG Energy Council, the Commission monitors key trends in grid usage as well as development and uptake of new technologies and business models.

For the 2019 review, the Commission will commence consultation on alternative approaches to network service provider expenditure assessment and remuneration - as recommended by the Finkel Review. This follows on from the Commission’s finding in the 2018 review that incentives are not aligned and in certain circumstances, a strong capital expenditure bias exists.  

The 2019 review report will also provide a centralised repository of information and an update on the various workstreams supporting efficient investment in decentralised energy resources.

The AEMC has published an approach paper seeking stakeholder feedback on the range of potential solutions available to address the issue of capital expenditure bias. Submissions were due by 14 February 2019 and can be found below.

The AEMC held a public workshop to discuss network expenditure bias in Melbourne on 6 March 2019.

Workstream two: regulatory sandboxes

The emergence of innovative energy technologies and business models can bring significant benefits to consumers, but new concepts can sometimes be inconsistent with the existing regulatory framework. 

The AEMC is exploring potential barriers to trialling new approaches and whether there may be a need for formal regulatory sandbox arrangements in the national electricity market. A "regulatory sandbox" is a framework within which participants can trial innovative technologies, business models, products and services in the market under relaxed regulatory requirements at a smaller scale, on a time-limited basis and with appropriate safeguards in place.

The Commission was requested to consider issues beyond economic regulation of electricity networks and the need for regulatory sandbox arrangements in other parts of the energy regulatory framework, for example, relating to wholesale electricity markets and consumer protections.

Draft report

On 11 July 2019, the AEMC published its draft report recommending regulatory sandbox arrangements to facilitate innovative trials, technologies and business models in the national energy markets. The draft report builds on the AEMC’s interim advice published in March 2019.  This work is being done at the request of the COAG Energy Council. 

The AEMC’s draft report recommends that a sandbox toolkit be introduced in the national energy markets. In forming its draft recommendations, the AEMC has been mindful to provide a framework to support innovators while maintaining appropriate consumer safeguards.  

The proposed sandbox toolkit includes:

  • The innovation inquiry service. A new, coordinated approach to providing feedback and guidance to proponents of innovative trials, technologies and business models.  This approach has been developed in collaboration with the Australian Energy Regulator (AER), Australian Energy Market Operator (AEMO), Australian Renewable Energy Agency (ARENA) and Energy Consumers Australia (ECA).
  • Regulatory waivers. A new AER regulatory waiver power that can provide time-limited regulatory relief from the rules to eligible trials.  
  • Trial rule changes. A new AEMC expedited rule change process for sandbox trials.  This can be used for eligible trials requiring a time-limited change to existing rules or new rules. 

The proposed tools can be used according to their suitability to the  proposed trial, as described below:

  • Trial proponents can use the innovation enquiry service to get an informal steer on regulatory implications for their proposed trials that can help them conduct trials under the existing rules. The service can also provide them information about the other regulatory tools. 
  • Proposed trials facing a regulatory barrier arising out of the existing rules can apply to the AER for a time limited regulatory waiver. 
  • Proposed trials that require a change in the existing rules or a new rule can consider submitting a trial rule change request. 

Next steps

The AEMC will hold a stakeholder workshop on 26 July 2019 to gather views on its proposed regulatory sandbox toolkit to support proof-of-concept trials in the energy markets.  The forum will also be webcast. Register for the forum here.

Stakeholder submissions are due by 8 August 2019. 

Final advice on the sandbox toolkit and recommended law and rule changes will be published in September 2019.      
 

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Documentation

PUBLIC WORKSHOP - INCENTIVES AND MARKET DEVELOPMENT

AEMC Documents