News Topic ID

AEMC releases draft report on wholesale demand response mechanism

10 July 2025

The Australian Energy Market Commission (AEMC) has released a draft report recommending that the wholesale demand response mechanism (WDRM) should continue operating in the national electricity market.

The WDRM allows large electricity users to be paid for reducing their consumption when the grid is under stress – for example, a factory temporarily switching off equipment during peak demand periods.

The Commission maintains its commitment to strengthening demand-side participation in the national electricity market (NEM) to enable improved market and consumer outcomes.

The recent Integrating price-responsive resources into the NEM (IPRR) and Unlocking CER benefits through flexible trading (CER benefits) final rules are the main vehicles for driving demand-side participation in the market.

AEMC Chair, Anna Collyer, said the review is timely given the AEMC's recent work on two-sided market solutions.

"The AEMC's work through integrating price responsive resources means that there are new opportunities for both energy suppliers and users to participate in ways that weren't possible before," Ms Collyer said.

"The WDRM continues to have a useful role alongside these broader market reforms, allowing certain types of demand response to participate in the wholesale market."

The AEMC's second draft recommendation is that the pending rule change request, Expanding eligibility under the WDRM, should be initiated to assess whether sites with multiple connection points should be allowed to participate in the mechanism. This has the potential to increase participation in the WDRM and deliver additional benefits.

Submissions to the draft report are due by 14 August 2025.

For more information, visit the project page.

Media: Jessica Rich | 0459 918 964 | media@aemc.gov.au

AEMC releases draft determination on inertia market proposal

26 June 2025

The Australian Energy Market Commission (AEMC) has released a draft determination proposing not to make a rule to introduce an inertia trading market. The Commission found the costs of implementing and running the market would outweigh the likely benefits, while existing frameworks can deliver adequate outcomes for now.

The draft determination responds to the Australian Energy Council's request for a real-time market to trade inertia - the grid stability service that prevents blackouts when big generators trip. The Commission's analysis found implementation would deliver minimal benefits under current conditions.

AEMC Chair Anna Collyer said the decision reflects a proportionate approach that avoids premature change while maintaining flexibility for the future.

"We're not missing out on consumer benefits by waiting. Our analysis shows foreseeable inertia needs are likely to be met through synchronous condensers being installed for system strength, which provide inertia as a co-benefit at low marginal cost,” Ms Collyer said.

"This is about getting the timing right. Technical enablers like real-time inertia measurement need further development, and recent security framework reforms will enable innovation and learning before we layer on additional changes.”

The economics don't stack up

The AEMC’s draft analysis, which considered various modelling scenarios, found that under current conditions, expected benefits would be modest compared to the implementation costs of $5-10 million upfront plus millions more in annual operating expenses.

"Based on our draft assessment, implementing a complex new market for such modest benefits would not be in consumers' interests right now," Ms Collyer said.

The AEMC expects that recently reformed frameworks should deliver adequate inertia as they are rolled out. While system strength solutions are still being procured, they are expected to contribute inertia once operational. These frameworks need time to be implemented before further changes are considered.

Building blocks for the future

The draft determination proposes several steps to prepare for potential future implementation:

The Reliability Panel would monitor system indicators to identify when conditions may warrant implementing an inertia market
AEMO would enhance transparency of its technical work through its Transition Plan for System Security
Networks would improve communication about procurement decisions
Innovation trials would continue testing new applications of emerging technologies, such as synthetic inertia from batteries

What is inertia and why does it matter?

Inertia acts like the power system's shock absorber, it cushions sudden changes that could cause blackouts. Traditional coal and gas generators naturally provide inertia through their spinning turbines, but as these retire and are replaced by solar, wind and batteries, the grid needs new sources of this essential stability service.

Next steps

Stakeholders have until 7 August 2025 to provide feedback on the draft determination. The Commission expects to make its final determination later this year.

For more information, please visit the project page for Efficient provision of inertia

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Final rule to allow cash as credit support

26 June 2025

The Australian Energy Market Commission (AEMC) has published a final determination expanding credit support options available to participants in the National Electricity Market, with particular benefits for smaller retailers and consumers.

The final rule will allow participants to provide up to $20 million each in cash as credit support, in addition to existing bank guarantee and letter of credit options.

AEMC Chair Anna Collyer said the rule modernises credit support arrangements and delivers broad market benefits.

"While this rule change was initially requested by Delta Electricity to address specific financing challenges, our consultation revealed much broader market issues affecting many participants," Ms Collyer said.

"The final rule improves flexibility and reduces costs for all participants, with particular benefits for smaller retailers who face higher financing costs and barriers to entry. This will enhance retail competition and deliver benefits to consumers through lower prices."

Under current rules, net debtors in the market – typically retailers who purchase electricity and owe money to the market – must provide a bank guarantee or bank letter of credit as credit support. Securing these guarantees often involves lodging cash with the lender and paying fees.

The new cash option enables participants to provide cash as credit support directly to AEMO, avoiding reliance on third-party lenders and reducing risks of administrative delays that could prevent timely credit support provision.

Small and prospective retailers are expected to benefit most, as they typically have higher financing costs and limited access to capital compared to larger participants.

The AEMC responded to strong stakeholder support by increasing the cash limit from $5 million proposed in the draft to $20 million in the final rule.

The final determination also includes multiple layers of legal protections to prevent cash from being reclaimed if a participant becomes insolvent, and allows AEMO to distribute any delayed payments to other participants more efficiently.

The final rule commences on 1 November 2026, as recommended by AEMO based on implementation requirements and coordination with other major market reforms.

Visit the project page for more information and contact details.

Media: Jessica Rich 0459 918 964 or media@aemc.gov.au

AEMC appoints new retail customer representative on AEMO's Settlement Residue Committee

05 June 2025

The AEMC has appointed Andrew Wilkins to AEMO’s Settlement Residue Committee as the new retail customer representative.

Mr Wilkins is currently the Energy Markets Specialist at SA Water, one of South Australia’s largest energy users. He brings engineering and science qualifications plus governance committee experience.

The appointment follows the AEMC’s call for nominations in April 2025.

Under the National Electricity Rules, AEMO must establish the Settlement Residue Committee, with the AEMC appointing the retail customer representative.

The committee oversees the auction process that manages financial risks in the electricity market, making it an important part of the market's governance framework.

Mr Wilkins joins representatives from AEMO (chair), generators, market customers, transmission network service providers, traders, and participating jurisdictions.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC modernises grid connection rules to accelerate energy transition, manage AI boom

22 May 2025

The Australian Energy Market Commission (AEMC) has finalised a comprehensive overhaul of the technical requirements for connecting to the national electricity grid.

The Commission is also addressing emerging challenges to the grid from new large energy users such as data centres and hydrogen electrolysers.

The Commission today published its final determination on "Package 1" of improvements to the National Electricity Market (NEM) access standards, which focuses on making it faster and cheaper for renewable energy generators to connect to the grid.

At the same time, the AEMC is seeking stakeholder feedback on "Package 2", which proposes new requirements for large energy users to ensure power system security.

Both packages stem from the Australian Energy Market Operator’s (AEMO) comprehensive review of technical requirements for connection, which involved extensive stakeholder consultation.

AEMC Chair Anna Collyer said these reforms would help accelerate Australia's energy transition while maintaining system security.

"This is the most significant modernisation of the NEM technical connections standards since 2018, coming at a critical time when the pace of connections needs to accelerate dramatically to meet Australia's renewable energy targets," Ms Collyer said.

"With renewable energy projected to triple by 2030 and utility-scale batteries to increase fivefold in the same period, these reforms will help reduce connection bottlenecks while maintaining system security."

The finalised Package 1 reforms will make the grid connection process more efficient by:

adding more prescription and clarity to technical requirements, reducing costly negotiations
better accommodating inverter-based resources like solar, wind and batteries
broadening application to synchronous condensers and high voltage direct current (HVDC) links needed for system stability.

The finalised Package 1 reforms will commence on 21 August 2025, with transitional provisions to minimise disruptions to ongoing connection applications.

The Commission is now also seeking stakeholder feedback on Package 2, which seeks to address the projected growth of large-scale electricity users, particularly data centres driven by AI development.

"The rise of artificial intelligence is driving unprecedented demand for data centres in Australia, with some facilities potentially requiring as much electricity as small cities," Ms Collyer said.

"Package 2 proposes new standards to ensure these facilities can respond appropriately during power system disturbances and don't inadvertently make problems worse during system events."

The potential need for reforms in this space was highlighted by a recent incident in the United States where 60 data centres consuming 1,500 MW of power disconnected simultaneously during a system disturbance, compounding grid stability issues.

With Package 1 now finalised and Package 2 open for stakeholder input, the AEMC is progressing a comprehensive approach to connection standards. The Commission invites stakeholder feedback on Package 2 by 19 June 2025.

For more information about Package 1 on Improving the NEM access standards, visit its project page. For more about Package 2, or to provide feedback, visit its project page.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Draft rule to increase credit support options and flexibility

03 April 2025

The Australian Energy Market Commission (AEMC) has published a draft determination that would expand credit support options available to participants in the National Electricity Market (NEM).

The draft rule would allow the Australian Energy Market Operator (AEMO) to accept cash and surety bonds as credit support from market participants, in addition to bank guarantees or letters of credit that are currently permitted.

AEMC Chair Anna Collyer said the Commission has made a more preferable draft rule that balances the benefits of increased flexibility while managing potential risks.

"Our draft determination provides greater flexibility for market participants to meet their financial security requirements, which will help reduce costs and barriers to entry, particularly for smaller retailers," Ms Collyer said.

"This expanded range of options also addresses growing concerns about access to traditional credit support options for some participants, while supporting reliable electricity supply and delivering benefits to consumers through enhanced retail competition."

Under the current rules, net debtors in the market – typically retailers who purchase electricity and owe money to the market – must provide a bank guarantee or bank letter of credit as credit support. Securing these guarantees often involves lodging cash with the lender in addition to paying fees.

The draft rule would allow participants to provide up to $5 million in cash as credit support each, use surety bonds from providers meeting acceptable credit criteria, and obtain credit support from a broader range of providers.

These new options would allow participants to provide credit support in the least-cost form for their individual circumstances. This would particularly benefit small and prospective retailers, who typically have higher financing costs and lower access to capital. The flexibility to use cash also means participants can provide credit support directly to AEMO without needing a lender.

The draft rule includes multiple layers of protection against risks if a company becomes insolvent after providing cash as credit support, and also allows AEMO to distribute any delayed credit support payments to other participants in a more timely manner.

The draft changes follow a rule change request submitted by Delta Electricity in October 2024, which considered that a number of institutions were no longer providing financing facilities to certain generators due to their evolving environmental, social and governance (ESG) policies.

"While the energy transition is progressing, the AEMC recognises there is ongoing reliance on existing generation, particularly to ensure reliability through the transition period," Ms Collyer said.

"This draft rule would give all participants more options to meet their credit support obligations, whether they're established generation businesses, small retailers, or new entrants bringing innovative energy solutions to market."

Stakeholder submissions on the draft determination close on 15 May 2025.

For more information, contact: AEMC Media: 0409 700 678 media@aemc.gov.au

AEMC launches review of the wholesale demand response mechanism

13 March 2025

The Australian Energy Market Commission (AEMC) has initiated a review into the wholesale demand response mechanism (WDRM), with the release of a consultation paper today, as required under the National Electricity Rules.

The WDRM, which commenced operation in October 2021, aims to enhance the flexibility and reliability of the National Electricity Market (NEM) by allowing demand response to bid directly into the wholesale market as a substitute for generation.

Demand response refers to the ability of energy users to temporarily reduce or shift their electricity consumption during periods of high demand or system stress, helping to balance the grid without the need for additional generation.

AEMC Chair Anna Collyer said the review is timely given the Commission’s recent work on two-sided market solutions.

"The AEMC's work through integrating price responsive resources mean that there are new opportunities for both energy suppliers and users to participate in ways that weren't possible before," Ms Collyer said.

"Our review will ensure that the market is set up to ensure that the demand side, from households to large customers, are able to participate in the market and be rewarded for their participation."

The consultation paper seeks stakeholder feedback on whether recent regulatory developments have influenced the need for the WDRM or if modifications could enhance its effectiveness.

Key considerations include:

The impact of recent market reforms on two-sided market development
Whether the WDRM continues to serve its intended purpose given evolving market conditions
How the WDRM fits within the broader framework of demand-side participation

"Through this consultation process, we want to hear directly from market participants about how the WDRM functions within the context of our evolving energy market," said Ms Collyer.

"This feedback is critical as we evaluate whether our recent rule changes on Unlocking CER benefits through flexible trading and Integrating price-responsive resources into the NEM, have created market conditions that complement or potentially overlap with the WDRM's objectives."

To explore these issues, the AEMC is asking for submissions on the consultation paper by Thursday 24 April 2025.

Visit the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC updates market price cap for 2025-26

27 February 2025

The Australian Energy Market Commission (AEMC) has released updates to key reliability settings that apply to the national electricity market (NEM).

Under the National Electricity Rules, the NEM's market price cap (MPC) and cumulative price threshold (CPT) must be adjusted in line with the consumer price index by 28 February each year.

The MPC is the maximum price that can be reached on the spot market during any dispatch and trading interval. The CPT is the maximum price across seven days’ worth of trade.

On 7 December 2023, the Commission made a final rule to increase the base rate of the MPC and CPT, which will progressively increase from 1 July 2025 through to 1 July 2027.

The values for 2024-25, the new base values, and the CPI-adjusted amounts for 2025-26 are as follows.

	From 1 July 2024 to 30 June 2025	New Base Value (2022)	From 1 July 2025 to 30 June 2026
MPC	$17,500/MWh	$18,600/MWh	$20,300/MWh
CPT	$1,573,700/MWh	$1,674,000/MWh	$1,823,600/MWh

The updated values and underlying calculations for 2025-26 are in a schedule of reliability settings on the AEMC website.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

AEMC makes jurisdictional derogation to support reliability in South Australia

23 January 2025

The Australian Energy Market Commission (AEMC) has made a final rule to help secure South Australia's electricity supply this summer. The decision allows two additional power stations to be considered as emergency backup power sources.

The temporary rule change enables the Australian Energy Market Operator (AEMO) to consider contracting Snuggery and Port Lincoln power stations (owned by ENGIE) in South Australia as emergency out-of-market reserves. This exemption from usual market restrictions will end on 31 March 2025.

Without sufficient backup electricity reserves, South Australia could face potential load shedding during severe cases of reliability shortfalls, particularly during extreme weather events. Such an outcome could severely impact households and businesses.

The Commission made this one-off exemption due to a combination of specific factors:

AEMO has identified worsening reliability risks for South Australia this summer
an insufficient response to AEMO's tender for emergency reserves has increased load shedding risks
two power stations (Snuggery and Port Lincoln) were unavailable due to mothballing.

While the Commission remains committed to preserving the wholesale market as the primary means of ensuring reliability, this temporary measure is warranted given the unique combination of factors that exist.

The rule change was processed urgently with one round of stakeholder consultation. No objections were received to using this expedited process.

Visit project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

Energy market gets clear vision: Reform opens door for all to benefit from virtual power plants

19 December 2024

The Australian Energy Market Commission (AEMC) has released a final determination that allows virtual power plants to compete directly with large-scale generators in the energy market, to the benefit of all consumers through significant cost savings, lower emissions, and reduced energy prices.

The reforms create efficiencies by allowing virtual power plants and commercial and industrial demand response and aggregated batteries to compete directly with traditional power stations.

Currently there is no mechanism for the market to predict how these resources will respond to daily price fluctuations.

This gap in market knowledge creates significant operational challenges for the Australian Energy Market Operator (AEMO) and can lead to costly system operations. These problems are growing as the rollout of batteries and electric vehicles gathers pace.

AEMC Chair Anna Collyer said this work represents a pivotal moment in our energy market's evolution.
''This reform is like giving the electricity system a pair of glasses – suddenly, it can see and respond to retailers' and customers' actions that were previously invisible.

''We are enhancing market efficiency by creating new opportunities for both energy suppliers and users to participate in ways that weren't possible before,'' she said.

The reforms create a new ''dispatch mode'' that allows retailers to bid these resources into the wholesale electricity market.

This includes virtual power plants combining household batteries, community batteries, backup generators, and large energy users managing their consumption.

"Whether it's data centres shifting computing load, manufacturers using backup generators, commercial chillers, or household batteries aggregated as virtual power plants, retailers can now bid these resources into our wholesale market," Ms Collyer explained.

The Commission's modelling shows that if these resources participate, it could deliver $834 million in cost savings between 2027 and 2050 through more efficient market operation.

To overcome initial barriers and secure these long-term benefits for consumers, the reforms include a $50 million incentive scheme for early participants.

"This improved visibility will lead to more efficient generation use, lower system costs, and reduced energy prices for all consumers.

''While there are costs to encourage early participation, the long-term benefits for consumers far outweigh these initial investments. It's a win-win that doesn't require changing behaviour, just smarter market operation." Ms Collyer said.

The reform represents the primary focus of the AEMC's work program for integrating consumer energy resources into the wholesale electricity market.

The new framework will take effect from May 2027, with incentives available from April 2026.

Visit the project page for more information and contact details.

Media: Jessica Rich, 0459 918 964, media@aemc.gov.au

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