The AEMC has published a report prepared by The Brattle Group looking at developments in international jurisdictions relating to demand response. The AEMC commissioned The Brattle Group to update a previous report to help inform the AEMC’s assessment of three rule change requests related to facilitating wholesale demand response in the national electricity market.

The AEMC asked The Brattle Group to assess the same six jurisdictions that were covered in the previous report and provide an update on relevant developments. These were: PJM interconnection, ISO – New England, Ontario, Alberta, Singapore and ERCOT. 

These markets can be considered to be a cross-section of different types of market design. Some are where capacity payments are paid to generation and demand response in addition to the wholesale energy market; whereas others only reward participants through the wholesale energy market. There are also differences in terms of the volatility of wholesale market outcomes, and size and type of generation mix. The report provides more detail on the characteristics and design of the energy markets in each of these jurisdictions.

The Brattle Group was asked to look specifically for changes and developments in relation to wholesale demand response since the time the Brattle Group last reviewed these jurisdictions. In particular, the Brattle Group was asked to look at how wholesale demand response is facilitated in a transparent and schedulable manner.  

The key findings from The Brattle report were:

  • As the electricity industry transforms toward intermittent generation sources, wholesale demand response will become increasingly important for balancing the system.
  • Since its previous report in 2015, there does not appear to have been significant increases in the amount of demand response quantities that are registered in those jurisdictions that either provide wholesale demand response, or ancillary services. Further, some jurisdictions had shown decreases in the quantities of registered demand response. 
  • In some jurisdictions, the rules that govern participation of demand response in the wholesale market have been changed in order to make demand response able to be dispatched and so relied on by the system operator, in order for this to assist with reliability. Necessarily, this has generally reduced the amount of demand response that can be offered and provided in these wholesale market since not all demand response can meet these characteristics. For example, to better support reliability PJM now requires demand response providers to be available all year round, rather than just at particular times of the year, which has reduced the number of available providers.
  • In jurisdictions where demand response providers receive upfront availability payments, there tend to be higher levels of demand response being made offered for use in the wholesale market. However these resources were infrequently dispatched in the wholesale energy market, because prices were not as volatile and so often did not reach levels where the demand response would be economic to dispatch. 
  • In jurisdictions where demand response providers don’t receive an upfront availability payment, most wholesale demand response occurs through loads simply responding to the wholesale price. However, since this is not clearly integrated in the wholesale market, the demand response that occurs is not transparent to the rest of the market and is so is difficult to quantitatively assess how much there is.

The Brattle Group also looked at proposals being considered by the European Union. The report found that the proposed European legislative framework calls for demand response aggregators to be able to contract with customers directly without needing to go through or have an arrangement with the retailer. This legislative framework is yet to be developed. The proposal would require retailers to be compensated by the aggregators if they imposed costs on the retailers.

The Brattle Group’s report is now available on the Wholesale demand response mechanism project page.

A draft determination on the rule change requests is due to be published on 18 July 2019. These rule change requests are being progressed as part of the Commission’s broader Reliability work plan.

Media: Prudence Anderson, Communication Director, (02) 8296 7817; 0404 821 935