How digitalisation is changing the national electricity market. The potential move to a two-sided market: Information paper

The Australian Energy Market Commission (AEMC) has opened discussions on how to harness digital disruption in the Australian energy market for the benefit of consumers.

Looking to the examples of platforms used by buyers and sellers like eBay and Airbnb, AEMC Chairman John Pierce said the digitalisation of household appliances and other energy-consuming technology is fast coming to the point where a true two-sided market is possible.

“Appliances in our homes and businesses are increasingly automated.

“They are becoming smarter and giving us real opportunities to better manage demand to reduce system costs to save people money,” Mr Pierce said.

“Consumers – or someone acting on their behalf - can set and forget devices such as batteries, pool pumps, air conditioners and electric vehicles to consume electricity at the cheapest times and export it back to the grid at times when it has the most value.

“More sophisticated consumer participation like this takes the pressure off the grid and reduces the overall costs of the system. It also generates returns for families and businesses who are investing in smart appliances and distributed energy resources of all kinds.

“It’s a point worth making very strongly. When individuals engage with the market they are not just helping themselves, prices can fall for everyone,” Mr Pierce said.

The AEMC’s vision is for high levels of two-way trade of electricity in a wholly connected energy market where consumers are rewarded when buying and selling energy in real time.

The power system is already changing along these lines.

“Technology is driving broadscale decentralisation. More people are interested in do-it-yourself-generation and are motivated to explore energy efficiency.

“The days of a relatively small number of centrally controlled, big generators dominating the market are going,” Mr Pierce said.

Looking to the future - both the demand and supply sides of the energy market would be actively engaged in electricity scheduling and dispatch processes – while delivering all the services people expect like hot water, air-con and dishwashing

Less generation and network capacity would be needed in a market with higher levels of consumer participation and responsiveness. Decisions to consume or not to consume would be valued digitally through any device that’s connected to the internet and remotely controlled.

“Then all you will need are price signals to automatically switch your household or business power plant from grid import to export and back again delivering the services you want at least cost. It would also be cheaper for streets and suburbs to share local generation resources and storage devices.

Retailers and aggregators who work with customers to maximise their flexibility to turn up or turn down their net power use could offer better deals because they are actively managing customer resources – acting like a virtual power plant.

This means demand response could actively compete with more expensive generation.

“We are on the edge of the next big wave in energy market development. We need to get ready now so we are prepared to realise the benefits which digitalisation will bring, Mr Pierce said.

AEMO knows how much generation to expect from scheduled generators, and now we need to get a better handle on the virtual power plants which households are creating through solar PV and local storage.

“Until now, we have been limited by technology, but digitalisation has progressed to the point where it is time to consider a completely new approach.

“We are starting a new conversation to capture and extend the benefits of digitisation for all energy consumers into the future,” he said.

This AEMC information paper is part of the Energy Security Board’s (ESB) 2025 market design work. The ESB expects to consult on specific reform options in early 2020.

The information paper released today is also informing AEMC decision-making on new rules and our proposed wholesale demand response mechanism which will publish a final determination in December 2019.


Media contact:

AEMC Communication Director, Prudence Anderson 0404 821 935 or
(02) 8296 7817