MCE
The MCE recognises the potential for demand side participation (DSP) to improve the efficiency of the National Electricity Market (NEM) and supports a regulatory framework that promotes the efficient adoption of DSP opportunities.
DSP represents a major opportunity for electricity users to better manage the cost of their consumption as Australia’s energy markets transition to a low carbon economy.
DSP refers to the ability of energy consumers to make decisions regarding the quantity and timing of their energy consumption that reflect their value of the supply and delivery of electricity. These decisions include both short-run decisions in response to specific events, and longer-run investment decisions about energy efficiency.
Australia’s energy systems have in the past been largely supply side focused, with energy system investment and operational decisions made to ensure adequate supply to meet forecast demand. However, improvements in metering technologies, network management practices and distributed generation technologies are enabling demand side participation to become a more active component in energy market operations.
DSP can take many forms including:
Energy Efficiency (EE)
Energy efficiency refers to the use of less energy for the same outcome or level of output, or increasing the level of output from the same amount of energy.
Demand Side Response (DSR)
DSR refers to actions by energy users to reduce their demand for network supplied energy in response to pricing signals during periods of peak demand or network stress. This may include the use of distributed generation, shifting consumption to off-peak periods or simply choosing to consume less and foregoing a level of activity.
Distributed Generation (DG)
DG, also called embedded generation, refers to generation units that connect to the distribution network (close to load), rather than to the transmission network. This may include co-generation units, back-up generation or renewable energy generators, including residential solar.
The MCE is addressing EE issues through its Energy Efficiency Working Group.
The MCE is addressing barriers to the efficient uptake of DG and DSR through its energy market reform work programs. Work to date has focused on addressing barriers to DSP when establishing new national distribution and retail regulatory frameworks under the Australian Energy Market Agreement.
This framework sets out the rules by which the regulator is to determine and oversee the revenues and prices of distribution businesses. In part, this provides a greater focus on distributors’ ability to achieve efficiencies through managing, rather than necessarily meeting, forecast load growth.
This framework will set out the obligations and requirements on distribution businesses and retail customers for establishing, or modifying, a connection to the distribution network, including micro embedded generation connections.
This framework will set out the network planning and annual reporting requirements for distribution businesses and the processes distribution businesses must undertake before augmenting the network, including the consideration of non-network alternatives (DSP).
DSP opportunities for small customers, particularly residential customers, are also being addressed as part of the National Framework for Smart Metering.
DG issues were previously addressed by the MCE’s Renewable and Distributed Generation Working Group (RDGWG). Outcomes from the RDGWG’s work program have been integrated into the development of the national distribution network regulatory frameworks outlined above.
User Participation issues were also considered by MCE at the commencement of its energy market reform program. This work is addressed in MCE Bulletins 4, 7 and 22 available from the archived bulletins webpage.
A key workstream addressing barriers to DSP is the AEMC Review of Demand Side Participation in the National Electricity Market. This review was initiated by the AEMC in October 2007 when it wrote to the MCE advising of its intention to investigate the potential for amendments to the Rules in order to better facilitate DSP.
The AEMC released a final report for stage 2 of this review in December 2009. The MCE response to the report [PDF, 500KB] was released in July 2010. In accordance with this response, the MCE’s Standing Committee of Officials submitted a Rule Change Request to the AEMC [PDF, 500KB] in November 2010 which would:
On 29 March 2011, the Ministerial Council on Energy directed the Australian Energy Market Commission to undertake a further review regarding Demand Side Participation (DSP) in the National Electricity Market (Stage 3 DSP Review).
The Stage 3 DSP Review is a broader review that aims to identify market and regulatory arrangements that would enable the participation of both supply participants and demand side consumers in achieving an economically efficient demand/supply balance in the electricity market.
As part of the Stage 3 DSP Review, the AEMC will specifically investigate the implications of smart meter and smart grid technologies, the efficient operation of price signals, and the effectiveness of regulatory arrangements for energy efficiency.
The Stage 3 DSP Review is due to be completed in September 2012. For further information on the Stage 3 DSP Review, please visit the AEMC website.
Several other Rule change proposals considered by the AEMC have also addressed DSP issues, including: