Rule Change: Open
This rule change request from the Public Interest Advocacy Centre (PIAC), Total Environment Centre (TEC) and the Australia Institute (TAI) seeks to introduce a mechanism for wholesale demand response in the national electricity market.
It is one of three rule change requests the Commission has received that relate to wholesale demand response. The other requests are:
- On 18 October 2018 the Australian Energy Council (AEC) has submitted a rule change request seeking to introduce a register for wholesale demand response
- On 21 October 2018 the South Australian Government has submitted a rule change request seeking to introduce a mechanism for wholesale demand response. It has also proposed to introduce a separate, transitory market for wholesale demand response.
Second draft determination
On 12 March 2020, the AEMC released a second draft determination and draft rule to implement a wholesale demand response mechanism.
On 12 March 2020, AEMO also published a high level design to assist stakeholders in understanding the implementation of the wholesale demand response mechanism.
This draft rule represents an important reform for the NEM. It would introduce a low-cost mechanism for transparently engaging the demand side in central dispatch. Since the NEM commenced, the demand side has rarely participated in central dispatch. However, under this mechanism, consumers would be able to actively participate in central dispatch and be rewarded for the value they provide to the system. In addition, this mechanism would capture the benefits of greater demand side participation and share these benefits with all consumers. This mechanism also provides for more flexible capacity in the wholesale market. Wholesale demand response will be able to compete with peaking generation in times of tight supply and demand balance.
This second draft determination follows an extension for the time for making a final determination. On 5 December 2019 the Commission extended the time for making a final determination until 11 June 2020 under section 107 of the National Electricity Law (NEL) and section 266 of the National Electricity Retail Law (NERL). This extension followed the provision of supplementary information by the market operator, AEMO, on implementing the proposed mechanism. It also follows a COAG Energy Council request for advice on the introduction of a two-sided market to the ESB, which includes the AEMC.
The second draft rule implements a wholesale demand response mechanism that is similar in form to the mechanism set out in the previous draft determination. Following the extension, the Commission has made several improvements to the mechanism design. These improvements are designed to achieve:
- lower implementation costs for AEMO due to reduced investment in systems that are expected to become redundant if a two-sided market is introduced.
- an earlier start date. By reducing the costs and complexity of implementing the mechanism, the implementation date has been brought forward from 1 July 2022 to 24 October 2021.
- greater opportunities to learn about demand side participation in the event that a two-sided market is introduced.
Under the second 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.
Submissions on the second draft determination and draft rule close on 23 April 2020.
First draft determination
On 18 July 2019 the AEMC released a draft determination to implement a wholesale demand response mechanism.
Submissions on the draft determination closed on 12 September 2019. 38 Submissions were received and are available below.
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 received two requests, from ENGIE and SIMEC Energy, to hold a pre-final rule determination hearing in relation to the draft determination. The hearing was held on 6 August 2019. A transcript of the hearing, and associated materials, are available below.
The Commission also held two stakeholder consultation workshops on the draft determination on 16 August and 22 August 2019. The discussion notes and agendas for both workshops can be found below.
Technical working group
The AEMC formed a technical working group of experts from consumer groups, large consumers, network businesses, retailers, technology providers, market bodies and AEMO to consult on the proposed rule changes.
The AEMC has held five technical working group meetings:
- 22 March 2019
- 15 April 2019
- 30 May 2019
- 11 October 2019
- 8 April 2020
The discussion notes from these meetings can be found below.
First extension and consolidation
On 7 February 2019 the Commission extended the period of time for making the draft determination to 18 July 2019 under section 107 of the NEL and section 266 of the NERL. On 10 October 2019 the Commission extended the time for making the final determination by an additional three weeks due to complexity and the volume of issues raised by stakeholders in submissions in relation to how the rule is put in place in the regulatory framework.
Alongside the draft rule and draft determination, 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.
|Second draft determination||Second draft rule|
|Second draft rule (mark up)||Information sheet|
Pre-final rule determination hearing
Draft determination and draft rule workshops
|Workshop agenda – 16 August 2019||Workshop discussion notes – 16 August 2019|
|Workshop agenda - 22 August 2019||Workshop discussion notes - 22 August 2019|
WORKSHOP AND WORKING GROUP
|Consultation paper.pdf||Information sheet.PDF|
|Notice.pdf||Stakeholder feedback template.DOCX|
|Notice of s.107 extension.pdf||Workshop agenda - 5 March 19.pdf|
|Energy Consumers Australia – received 1 March 2019.pdf||Intelligent Energy Systems – received 20 March 2019.pdf|
|National Irrigators Council – received 29 March 2019.pdf||Wattwatchers – received 27 March 2019.pdf|