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AEMC launches major review to shape consumer-centric pricing

25 July 2024

The Australian Energy Market Commission (AEMC) today announced a comprehensive review that puts consumers at the heart of future electricity pricing, products, and services.

The Electricity pricing for a consumer-driven future Review will examine how the rapidly evolving energy landscape can best serve all Australians in an era of increasing consumer energy resources (CER).

AEMC Chair Anna Collyer emphasised the importance of this forward-looking initiative.

''As we see more households adopting technologies like solar panels and batteries, it's crucial that our electricity pricing, products, and services evolve to meet changing consumer needs.

''This Review will take a fresh look at how we can deliver the best outcomes for all consumers across the electricity supply chain,'' she said.

The Review comes at a critical time, with studies estimating that effective integration of CER could deliver net benefits of up to $6.3 billion by 2040. Realising these benefits hinges on offering consumers the right mix of products and services.

“Effectively integrating CER resources into the wider energy system will help to reduce overall system costs, improve reliability, and achieve a secure, low-emission energy supply for all consumers.

“The key to achieving these benefits is offering consumers the right products and services, as well as clear information, choice, and appropriate protections,” Ms Collyer explained.

The AEMC's Review will consider market arrangements that provide consumers with a range of appropriate products and services, and prices to suit their needs and preferences. It will also examine the roles of distribution networks and retailers in enabling these offerings and ensuring efficient outcomes.

"We're not just looking at those who have adopted new energy technologies. This Review will consider how to deliver benefits and protections for all consumers, whether or not they have CER at home,'' Ms Collyer said.

The AEMC has released draft terms of reference for the Review and is inviting stakeholder feedback by Thursday, 22 August.

These submissions will inform the final terms of reference, to be published as part of a consultation paper by November 2024.

''We're committed to conducting this Review in an open and collaborative manner. Input from consumers, industry, and other stakeholders will be crucial in shaping a future electricity market that works for everyone."

The AEMC expects to release the final report in early 2026, providing a roadmap for a more consumer-centric, efficient, and sustainable electricity market. Visit the project page for more information and contact details.

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

Virtual Power Plants to compete with big generators to drive down prices

25 July 2024

The Australian Energy Market Commission (AEMC) has released a draft paper that proposes allowing Virtual Power Plants (VPPs) 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 draft determination also extends beyond VPP's to include community batteries, flexible large loads, and other price-responsive small resources such as such as back-up generators, marking a significant shift in Australia's energy landscape.

AEMC Chair Anna Collyer said this work represents a pivotal moment in our energy market's evolution.

''By integrating VPP's and similar resources, we're not just enhancing market efficiency; we're empowering consumers and paving the way for a more sustainable energy future,'' she said.

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 could lead to costly system operations.

''Fully integrating these resources will allow energy, security, and reliability services to be provided more efficiently,'' explained Ms Collyer.

''Over time, this integration will reduce the need for large scale generation and storage infrastructure, ultimately decreasing costs and emissions for all consumers.''

Recent modelling indicates that VPP market participation could result in cost savings of $834 million between 2027 and 2050, benefiting all customers through more efficient market operation. This underscores the critical importance of encouraging VPP participation.

The AEMC is therefore calling on governments to recognise these resources officially. Once they participate in dispatch, they will be as technically capable as any other generator and should be eligible for schemes such as the Capacity Investment Scheme.

To encourage broad participation, the draft determination includes a mechanism to provide payments to early entrants. However, recognising that a mechanism in the rules may not be the ideal fit, the AEMC is also calling on the Australian Renewable Energy Agency (ARENA) to consider a trial grant program for early entrants.

Ms Collyer says the reform isn't just about integrating new technology but also about reimagining our approach to energy generation and distribution.

''By incentivising early participants, we're accelerating the transition to a more responsive, efficient, and sustainable energy market," she said.

The draft determination also addresses the current gap in the market knowledge regarding the impact these resources are having on operational forecasting. Under the proposal, AEMO and the Australian Energy Regulator would have new monitoring and reporting functions to provide additional transparency.

This rule change is a key component of a broader reform package aimed at integrating consumer energy resources. It represents the primary focus in the AEMC’s work program for integrating these resources into the wholesale electricity market.

''By making price-responsive behaviour visible, we're allowing the market to operate more efficiently. It's like giving the system a pair of glasses – suddenly, it can see and respond to consumer actions that were previously invisible.

''This improved visibility will lead to more efficient generation use, lower system costs, and potentially reduced energy prices for all consumers. It's a win-win that doesn't require changing behaviour, just smarter market operation,'' Ms Collyer said.

The AEMC invites stakeholders to provide feedback on this draft determination. The consultation period will run until 12 September, with a final determination expected by the end of the year.

Visit the project page for more information and contact details.

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

Panel released final recommendations on the form of the reliability standard, APC

27 June 2024

The Reliability Panel has found the current form of the reliability standard is well suited to ensure high levels of system performance as the National Electricity Market (NEM) transitions to net zero emissions.

The assessment is detailed in a final report following extensive stakeholder consultation, which overwhelmingly supported maintaining the current form of the reliability standard.

The reliability standard, a cornerstone of Australia's energy system, ensures sufficient electricity supply to meet consumer demand and determines other key market settings, such as the market price cap.

Tim Jordan, chair of the Reliability Panel, emphasised the importance of forward looking analysis:

''As we navigate an unprecedented market transformation, understanding future reliability risks is crucial.

''Our modelling provides critical insights about the future needs of the power system, particularly about the storage needed to manage reliability risks," he said.

The Panel's innovative modelling tested artificial extreme scenarios where there are not enough resources to meet the needs of customers.

Results demonstrated that while the risk profile will change as we rely more on variable renewable generation, the current form of the reliability standard will continue to provide the signal to invest in and operate the assets needed to manage the risk of reliability shortfalls.

The Panel acknowledges the challenges faced by the Australian Energy Market Operator (AEMO) in managing reliability and supports AEMO's efforts to improve communication of the reliability standard.

The final report also recommends maintaining the current form of the administered price cap which acts as a safety net by capping wholesale prices following prolonged periods of extreme prices.

The Panel will regularly review the price cap to ensure generation and storage continue to contribute to reliability during rare emergencies.

View the project page for more information and contact details.

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

Reliability Panel finds NEM performance stable in annual review

27 June 2024

The Reliability Panel today released its Annual Market Performance Review, assessing the reliability, security, and safety of the National Electricity Market (NEM) during the 2022-23 financial year.

The AEMC sets the rules for the National Electricity Market and provides independent expert energy advice to Australia’s governments. The AEMC’s Reliability Panel monitors and reports on the reliability, security, and safety of the electricity system and performs a range of other functions.

Despite the challenges faced by the energy sector, Reliability Panel chair Tim Jordan says the review found the NEM's performance was acceptable.

''The NEM has performed acceptably in terms of reliability, security, and safety, but more investment is crucial to address the risks to the outlook and continue to deliver reliably for consumers,'' Mr Jordan said.

The review showed there were no breaches of the reliability standard or interim reliability measure in FY2023. However, the latest 10 year reliability forecast from the Electricity Statement of Opportunities indicated risks to maintaining reliability in the medium term.

Security performance in the NEM was also acceptable during the reporting period. The number of system incidents remained steady compared to FY2022, with fewer activations of the reliability emergency reserve trader, and stable procurement costs for network support and control ancillary services and system restart ancillary services.

''The Panel notes increased climate variability could lead to more market events and pose a growing risk to system security in the future.

''The recently updated transitional security frameworks should help address security risks as we move to a renewables-dominated system,'' Mr Jordan explained.

Key events mentioned in the report included two major Supervisory Control and Data Acquisition (SCADA) outages in March and April 2023, severe weather events in South Australia in November 2022, and the introduction of the very fast raise and very fast lower frequency control ancillary service markets in October 2023.

No safety issues were identified as a result of the management of the power system.

The Annual Market Performance Review is conducted by the Reliability Panel in line with the National Electricity Rules and the terms of reference issued by the AEMC.

The review draws upon data from the Australian Energy Market Operator, the Australian Energy Regulator, jurisdictional regulators, market participants, and other sources.

Please visit the project page for more information and contact details.

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

Final rule to accelerate grid connections for renewable energy projects

27 June 2024

The Australian Energy Market Commission (AEMC) has published a final rule that creates a more clear and pragmatic process to speed up grid connections for new renewable energy generation and storage.

The R1 assessment requires generators and large-scale storage providers to demonstrate they can meet performance standards before being registered in the national electricity market.

A lack of clear obligations and timeframes were identified in the connections process following extensive industry collaboration as part of the Connection Reform Initiative (CRI). It led to a rule change request by the Clean Energy Council (CEC) which said the issues were causing long delays and investment uncertainty.

After substantial stakeholder engagement, the AEMC has made a more preferable final rule to the CEC’s proposal that addresses the gaps and creates more certainty for all parties.

It includes the removal of unnecessary barriers to timely connections and clearer obligations on both the connection applicants, as well as the Australian Energy Market Operator (AEMO) and network service providers (NSPs).

Additionally, there is an increased focus on transparency during the R1 assessment, that will require AEMO to update its registration information resource and guidelines.

AEMC Chair Anna Collyer said the final rule strikes the right balance for the transition.

“With nearly 600 renewable energy generation and storage projects currently in the connection queue, it is critical that we speed up the process without compromising system security.

“The final rule will help bring safe, clean and more affordable electricity to Australian homes and businesses sooner.

“It also aims to create greater certainty for the future clean energy investors that are needed to reach the nation’s emissions reduction targets,” she said.

The rule commences on 11 July 2024, with AEMO required to update its registration information by no later than 1 March 2025.

View the project page for more information and contact details.

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

AEMC seeks input on proposed clarification of market operator's role in cyber security

20 June 2024

The AEMC is considering a rule change that would clarify the role of the Australian Energy Market Operator (AEMO) to assist in maintaining the cyber security of our electricity system.

The proposal is set in out in a consultation paper for stakeholder feedback, following a rule change request by the Honourable Chris Bowen, Minister for Climate Change and Energy.

The AEMC sets the rules for the National Electricity Market (NEM) and provides independent expert energy advice to Australia’s State and Federal Governments. It is strongly focused on providing a framework for a reliable, sustainable electricity system in addition to affordable electricity prices

As our energy system becomes increasingly digitised and interconnected, AEMC Chair Anna Collyer says robust cyber security measures are crucial to ensure the reliability and resilience of electricity supply.

‘’Cyber security is an important enabler for the energy transition. For it be successful, the associated risks need to be well managed.

''The proposed rule change aims to formally recognise the provision of identified cyber security services as one of AEMO's core responsibilities under the National Electricity Rules.

''The objective is to provide clarity on their role in this area, enable cost recovery for cyber security services, and enhance accountability across the industry,'' she said.

The industry has already made significant progress in addressing cyber security challenges through initiatives like the Australian Energy Sector Cyber Security Framework (AESCSF).

Developed in collaboration with AEMO, industry, and government stakeholders, the AESCSF serves as a comprehensive framework and voluntary assessment program, enabling participants to evaluate and improve their cyber security maturity.

In addition, AEMO currently has existing emergency powers to respond to actual cyber incidents.

The proposed rule change aims to build upon these existing efforts, providing AEMO with the necessary tools and resources to further bolster the NEM's resilience against evolving cyber threats.

Under the proposed rule change, AEMO would be specifically required and funded to undertake four cyber security preparedness functions:

Coordinating a NEM cyber incident response plan
Supporting energy businesses to be prepared for cyber incidents
Providing expert cyber security advice to government and industry
Distributing critical cyber security information to market participants

The rule change would apply to AEMO in their capacity as operator of the NEM, which supplies electricity to the eastern states and South Australia.

The AEMC invites all interested stakeholders to provide feedback on the consultation paper by 18 July 2024. The insights gathered will inform the development of a draft determination, set to be published on 26 September 2024.

View the project page for more information and contact details.

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

Enhancing the Retailer of Last Resort scheme

20 June 2024

The Australian Energy Market Commission (AEMC) has released its final report with 10 recommendations to improve the Retailer of Last Resort (RoLR) scheme, drawing on valuable insights gained by regulatory agencies, market participants, and governments during the energy crisis of 2022, which saw an unprecedented number of retailer failures.

AEMC Chair Anna Collyer said the recommendations would simplify and improve both the RoLR scheme and the gas directions framework, providing market participants with greater certainty and clarity before, during, and after retailer failure events.

‘’The recommendations focus on supporting more timely access to critical information in the event of retailer failures, reducing the cost of such failures for consumers and designated RoLRs, and improving incentives within the RoLR scheme.

‘’These recommendations were informed and shaped through extensive stakeholder consultation over the past two years.

''We believe they will enhance the RoLR scheme as an effective safety net, helping address the risks faced by retailers and consumers when a retailer fails, ultimately supporting better market outcomes and ongoing financial resilience in the retail market," Ms Collyer said.

In the National Electricity Market’s (NEM) competitive retail market, high levels of entry and a dynamic spot market create the risk of retailer failures. As such, retailer failures are likely to occur over time, necessitating efficient and effective exit arrangements that ensure continuity of supply for impacted consumers while minimising costs and systemic risks.

Most of the AEMC’s recommendations involve changes to the National Energy Retail Law (NERL), meaning they must be implemented by jurisdictions.

‘’The AEMC welcomes the opportunity to work constructively with jurisdictions, to progress these recommendations for implementation,’’ said Ms Collyer.

Background:

The RoLR scheme protects consumers by ensuring continuity of supply to a customer if their retailer fails. This framework is supported by a gas directions framework which allows the AER to direct gas supply in the event of a retailer failure.

Between 2012 and 2022, the RoLR scheme had only been used four times, and the AER had never used its gas directions powers. Following the unprecedented number of retailer failures in mid-2022, Energy Ministers sought the AEMC’s expert advice on managing retailer failures and improving market resilience.

A key recommendation supported by Energy Ministers was for the AEMC to initiate this Review to consider improvements to the RoLR scheme. Our final report and 10 recommendations deliver upon this work.

View the project page for more information and contact details.

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

AEMC’s review of the Wholesale Demand Response Mechanism

30 May 2024

The Australian Energy Market Commission (AEMC) will conduct and complete its review of the Wholesale Demand Response Mechanism (WDRM) by 24 October 2025, to allow time to properly investigate "two-sided" market options proposed in closely related reforms.

The WDRM 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.

In its final determination and ruling to establish the WDRM, the AEMC scheduled a self-initiated review of the costs, benefits and effectiveness of the mechanism to take place by 24 October 2024.

However, in deciding to delay the review by 12 months, AEMC Chair Anna Collyer acknowledged the need to complete work on rule changes that go towards better integrating demand response and consumer energy resources.

‘’The AEMC is currently investigating two-sided market solutions that would potentially contribute to a future state of the NEM that offers more affordable and cleaner energy,” she said.

‘’These rule changes are Integrating price-responsive resources into the NEM (IPRR) and Unlocking CER benefits through flexible trading rule changes. Delaying the review of the WDRM will allow the AEMC to consider findings from these two rule changes as part of the review.’’

This delay will result in the Commission breaching its rules requirement to complete this review by October 2024. The AEMC has deemed this necessary, given the impact these rule changes may have on the direction of the review. To commence the review in advance of these rule changes would likely lead to an incomplete consideration of how best to integrate demand response into the NEM.

The AEMC is aware that stakeholders have expressed interest in the progress of the Review into the WDRM, and the Commission is committed to conducting a detailed review.

Stakeholders will have two opportunities to provide their feedback, at Consultation stage and the Draft Report stages, before the AEMC delivers its final report.

For more information, visit the project page.

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

AEMC finalises compensation for Snowy Hydro Limited's losses during 2022 market suspension

16 May 2024

The Australian Energy Market Commission (AEMC) has reached a final decision regarding Snowy Hydro Limited’s (SHL) claim for compensation under clause 3.14.6 of the National Electricity Rules (NER).

The claim was submitted following the application of the administered price cap during an administered price period in June 2022.

The relevant rules outlined in the NER and the AEMC compensation guidelines are designed to maintain incentives for market participants to supply services during periods of market stress, ultimately protecting customers from prolonged exposure to high prices.

After careful consideration, the Commission has determined that SHL is entitled to $11,206,127 in compensation for direct and opportunity costs incurred during the administered price period.

This compensation is being awarded to cover the losses SHL experienced while continuing to provide essential services to the energy market during the period.

The Commission will notify the Australian Energy Market Operator (AEMO) of the total compensation amount payable to SHL. AEMO will then recover the compensation cost from market customers who purchased energy from the spot market in the relevant eligibility periods and cost recovery regions.

More information, including the final decision document, can be found here. Information about other claims made in relation to the June 2022 event can be found here.

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

Final decision on Delta Electricity’s administered pricing opportunity costs compensation claims

16 May 2024

The Australian Energy Market Commission (AEMC) has reached a final decision regarding the claim for compensation submitted by Sunset Power International Pty Ltd, trading as Delta Electricity (Delta).

The claim sought compensation for opportunity costs incurred due to the application of the administered price cap in June 2022.

Under clause 3.14.6 of the National Electricity Rules (NER) and the AEMC compensation guidelines, market participants may claim compensation for certain losses experienced during an administered price period when the administered price cap (APC) or administered floor price is applied.

After careful consideration of Delta's claim and the supporting evidence, the Commission has determined that Delta is not eligible for compensation in this instance.

The AEMC will notify the Australian Energy Market Operator (AEMO) of its decision.

The Commission assesses each claim on its individual merits, in accordance with the NER and the AEMC compensation guidelines.

More information, including the final decision document, can be found here. Information about other claims made in relation to the June 2022 event can be found here.

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

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