Rule Change: Open

Overview

On 15 July 2021, the Commission made a more preferable draft rule (the draft rule) in response to a rule change request from AEMO. 
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On 15 July 2021, the Commission made a more preferable draft rule (the draft rule) in response to a rule change request from AEMO. 

The draft rule makes several changes to reduce barriers for storage to participate in the market. It also adds flexibility into the rules to create a framework that facilitates innovation in how the market supplies energy reliably and securely to meet the long term interests of energy consumers. 

Draft rule determination

The draft rule makes a number of changes that better integrate storage into the NEM, and also shape the rules to facilitate the future market where storage and hybrid systems are likely to play a much bigger role in firming up the growing amount of renewable energy, including:

  • introducing a new registration category, the Integrated Resource Provider (IRP), which would allow storage and hybrids to register and participate in a single registration category rather than under two different categories
  • providing clarity for scheduling obligations that apply to different configurations of hybrid systems, including DC coupled systems (which have different technologies behind a single inverter) who will have flexibility to choose whether those technologies are scheduled or semi-scheduled
  • transferring existing small generation aggregators to the new category, and enabling new aggregators of small generating units and/or storage units to register in this category (although Market Customers will still be able to include small generating and storage units in their portfolios) 
  • enabling aggregators registered in this new category to provide market ancillary services from generation and load.
  • amending the framework to recover non-energy costs based on a participant's consumed and sent out energy over relevant intervals, irrespective of the participant category in which it is registered. 

Next Steps

The Commission has allowed an extended period of time (9 weeks) for engagement on the draft rule determination with submissions due by 16 September 2021. 

The project team will hold a briefing session in early to mid-August, and will continue to engage with stakeholders over the next nine weeks. 

Background 

Energy storage is becoming an increasingly important part of the national electricity market (NEM) and recent forecasts point to a greater role for storage in the future. This requires the regulatory framework to evolve to support the market as it transitions.

On 23 August 2019, the AEMC received a rule change request from the Australian Energy Market Operator (AEMO) to support the participation of storage systems in the NEM, including by defining storage technologies in the National Electricity Rules (NER). 
 
The rule change proposal sought to address issues AEMO has identified with how grid scale batteries, aggregations of smaller batteries, and new business models with a mix of technologies behind the connection point (hybrid facilities), register and participate in the NEM. 

AEMO's rule change request proposed to define storage and hybrid facilities, so that the NER better recognise storage and connection points with bi-directional flows. 

In AEMO’s view, the rule change proposal would increase clarity and transparency for all stakeholders, remove barriers to entry for storage and hybrid facilities, and support the transition to an electricity system where more storage is needed to support variable renewable energy (VRE).

On 20 August 2020, the AEMC released a consultation paper to seek feedback on the significance of the issues identified by AEMO and whether these are likely to become more material in the future. This helped the Commission understand the importance and urgency of the issues, and whether they required a regulatory solution.

Submissions to the consultation paper closed on 15 October 2020 and the Commission received 38 submissions. 

On 3 December 2020 the Commission extended the period of time for making the draft determination to 29 April 2021 under section 107 of the NEL. This allowed the AEMC to publish an options paper on 17 December 2020 seeking further stakeholder feedback on both the participation and non-energy costs recovery frameworks. 

Submissions to the options paper closed on 11 February 2021.

On 27 April 2021, the Commission extended the period of time for making the draft determination to 29 July 2021 under section 107 of the NEL. 

The Commission made this decision because AEMO requested more time to consider the potential impacts from issues, not previously considered by AEMO, on its operating systems and procedures. The extension allowed us to jointly address any issues that arose.

Collaboration is key to the success of this rule change, and AEMC and AEMO have been working closely together to date on the complex issues that the rule change is seeking to address. 

The Commission also note that this work interacts with the Energy Security Board’s (ESB) post-2025 market design program. In particular the work interacts with the two-sided market workstream. The Commission is considering this rule change request in the context of these broader reforms.

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