Rule Change: Open

Overview

On 31 August 2018 the AEMC received a rule change request from the Public Interest Advocacy Centre (PIAC), Total Environment Centre (TEC) and the Australia Institute (TAI) seeking to introduce a mechanism for wholesale demand response in the national electricity market.
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On 31 August 2018 the AEMC received a rule change request from the Public Interest Advocacy Centre (PIAC), Total Environment Centre (TEC) and the Australia Institute (TAI) seeking to introduce a mechanism for wholesale demand response in the national electricity market. 

It is one of three rule change requests that the Commission received that relate to wholesale demand response. The other requests are:

  • On 18 October 2018 the Australian Energy Council (AEC) submitted a rule change request seeking to introduce a register for wholesale demand response.
  • On 21 October 2018 the South Australian Government submitted a rule change request seeking to introduce a mechanism for wholesale demand response. It also proposed to introduce a separate, transitory market for wholesale demand response.

The AEMC published a consultation paper covering all three rule change requests on 15 November 2018.

Draft determination

On 18 July 2019 the AEMC released a draft determination to implement a wholesale demand response mechanism. 

Under the draft rule, a new category of registered participant, a demand response service provider (DRSP), would be able to bid demand response directly into the wholesale market as a substitute for generation. A DRSP could also engage directly with a customer without the involvement of that customer’s retailer.

The mechanism introduced under the draft rule is designed to provide greater opportunities for consumers to participate in the wholesale market by bidding in demand reductions as a substitute for generation, thereby unlocking under-utilised demand response in the national electricity market (NEM). The Commission considers that the mechanism will promote greater demand side transparency, as well as price and reliability related benefits.

In the longer term, the Commission considers that moving to a two-sided market will assist the NEM in effectively evolving and transitioning to the future power sector, whatever that future may look like. A two-sided market is characterised by the active participation of the supply and demand side in dispatch and price setting. Moving to a two-sided market should enable the transition to a future NEM characterised by increased variable supply and more flexible, price responsive demand. 

The Commission has determined to not make a draft retail rule in response to the rule change requests, as a broader consideration of the appropriate energy-specific consumer protections is required. 

The Commission considers it important to provide opportunities to all consumers to participate in wholesale demand response. However, it is also important to make sure that appropriate energy-specific consumer protections are provided to consumers participating in the mechanism. As a result, the draft rule does not provide for small consumers to participate in the mechanism.

The substantive parts of the rule implementing the wholesale demand response mechanism are proposed to commence on 1 July 2022. The Commission has also made a series of complementary changes and recommendations relating to increasing transparency of wholesale demand response in the wholesale market. 

Submissions on the draft determination were due by 12 September 2019.

Stakeholder consultation

In preparing the draft determination, the Commission: 

  • held a stakeholder workshop on 5 March 2019 in Melbourne to discuss the rule change requests. The workshop agenda and slides from the workshop are available below. 
  • held three technical working group meetings attended by experts from industry, demand response providers and consumer groups. The group provided technical input into the development and assessment of the rule change requests. The discussion notes from these meetings can be found below.

The AEMC has received two requests, from ENGIE and SIMEC Energy, to hold a pre-final rule determination hearing in relation to the draft determination. The purpose of a pre-final rule determination hearing is to allow stakeholders to present their views on a draft determination to the Commissioners in person. The hearing was held on 6 August 2019. A transcript of the hearing, and associated materials, are available below.

The Commission held two stakeholder consultation workshops on the draft determination on 16 August and 22 August 2019. The workshop on 16 August 2019 considered commonalities of issues and concerns that arise specifically for retailers under the draft rule. The workshop on 22 August 2019 was open to all other interested stakeholders to discuss the draft determination and draft rule. The discussion notes and agendas from these workshops can be found below. The workshop on 22 August was also webcast for the benefit of stakeholders who were unable to attend in person. A recording of the workshop is available here.

Consolidation

The Commission also published two consolidation notices on 18 July 2019: 

  • The first notice related to the consolidation of ERC0247, ERC0248 and ERC0250. The three electricity rule change requests are consolidated under ERC0247 and named Wholesale demand response mechanism
  • The second notice related to the consolidation of RRC0023, RRC0025 and RRC0027. These three retail rule change requests are consolidated under RRC0023 and named Wholesale demand response mechanism - retail

Extension

On 7 February 2019 the Commission extended the period of time for making the draft determination for each of the three rule change requests to 18 July 2019 under section 107 of the National Electricity Law (NEL) and section 266 of the National Electricity Retail Law (NERL). 
Due to the revised publication date for the draft determination, the Commission also extended the time for making the final determination for each of the three rule change requests to 14 November 2019 under section 107 of the NEL and section 266 of the NERL. 

Background

These rule change requests follow the Commission’s consideration of wholesale demand response in its Reliability frameworks review

The AEMC’s final report for the Reliability frameworks review, published in July 2018, included a collaborative Reliability work plan with a series of actions to be progressed by the AEMC, AEMO and the AER.

One of the actions is to integrate more demand response in the wholesale market by:

  • enabling demand response aggregators and providers to be recognised on equal footing with generators in the wholesale market and so offer wholesale demand response transparently into the market.
  • implementing a voluntary, contracts-based short-term forward market that would allow participant-to-participant trading of financial contracts closer to real time. This will provide the demand side with more opportunities to lock in price certainty, making it easier for large demand side consumers to engage in the wholesale market and demand response in response to expected wholesale prices. AEMO has submitted a rule change request to us on this issue.
  • allowing consumers to engage multiple retailers / aggregators at the same connection point (multiple trading relationships). This will promote competition between retailers, support new business models for demand response and provide consumers with greater opportunities to engage in wholesale demand response with parties other than their incumbent retailer.

These rule change requests relate to the first recommendation above.
 

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