Market Review: Open

Overview

The AEMC is undertaking a review into the regulatory arrangements frameworks for stand-alone power systems under the National Electricity Law (NEL), the National Energy Retail Law (NERL) and associated rules. 
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The AEMC is undertaking a review into the regulatory arrangements frameworks for stand-alone power systems under the National Electricity Law (NEL), the National Energy Retail Law (NERL) and associated rules. 

A stand-alone power system (SAPS) is an electricity supply arrangement that is not physically connected to the national grid. The term encompasses both microgrids, which supply electricity to multiple customers, and individual power systems, which supply electricity to a single customer. 

This review, requested by the COAG Energy Council, will look at the law and rule changes required to allow local distribution network service providers to use SAPS where it is economically efficient to do so, while maintaining appropriate consumer protections and service standards. The review is also looking at regulatory arrangements for SAPS that are provided by parties other than local DNSPs. 

The terms of reference for the review sets out two priority areas of work:

  • Priority 1 is to develop a national framework to facilitate the transition of grid-connected customers to SAPS supply provided by the current distribution network service provider (DNSP), as well as a mechanism for the transition of grid-connected customers to third party SAPS supply. 
  • Priority 2 is to develop a national framework for the ongoing regulation of third party SAPS.

Final report – Priority 1

On 30 May 2019 the AEMC published a final report for priority 1. This report recommends a suite of changes to energy laws and rules to enable the use of stand-alone power systems by distributors.  These reforms will help unlock the benefits of new technologies that are increasingly allowing electricity services to be delivered through alternatives to a traditional grid connection at a lower cost and with improved reliability, and with other benefits such as reduced bushfire risks.

Customers who receive stand-alone systems will retain all of their existing consumer protections, including access to retail competition and existing reliability and safety standards. As such, customers would not be disadvantaged where a distributor determined that it would be more efficient to supply them on a stand-alone basis. Cost savings arising from the use of lower cost stand-alone systems will flow through to all users of the distribution network, through lower network prices.

An issues paper for priority 1 was published on 11 September 2018, and a draft report for priority 1 was published on 18 December 2018.

Consultation paper – Priority 2

On 1 March 2019, the AEMC published a consultation paper to invite initial stakeholder submissions on priority 2 of the review. 

The consultation paper sought stakeholder views on the extent and scope of regulation of stand-alone power systems that are provided by parties other than the local distribution businesses,  such as other participants active in the national electricity market, local councils and community groups. These systems are currently regulated in some jurisdictions by jurisdictional frameworks, and the jurisdictions will decide whether to transition current systems to the new arrangements.

The AEMC received 20 stakeholder submissions to the consultation paper which can be found below.

Next steps

Under the terms of reference, the AEMC is required to publish a final report for priority 1 by 31 May 2019, draft report for priority 2 by 30 June 2019, and a final report for priority 2 by 31 October 2019.

Related work

The Commission is concurrently working on updates to the regulatory framework for embedded networks, and the two workstreams will consider a number of related issues, particularly with regards to consumer protections. 

Background

The COAG Energy Council’s Energy Market Transformation work program, managed by the Energy Market Transformation Project Team (EMTPT), is considering the regulatory response to the emergence of SAPS as a viable option for providing electricity services to customers.

In general, SAPS are currently not captured under the national electricity frameworks.  SAPS are subject to jurisdictional legislative frameworks that vary in their comprehensiveness.  Queensland is currently the only state that applies the NERL retail protections to all off-grid electricity supply, and also applies the NERL distributor obligations to the 33 isolated systems run by Ergon Energy. 

While SAPS may provide benefits, regulation of these systems is justified for many of the same reasons as for standard supply from the national grid. Consequently there is now a need for more robust regulatory arrangements to be developed for SAPS.

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Documentation

PRIORITY 1 - FINAL

AEMC Documents