The Australian Energy Market Commission (AEMC) is reviewing the energy market to take into account new forms of generation.
The consultation will review the regulatory and market frameworks needed to support a reliable supply of electricity.
The market is facing variable, intermittent generation – including renewable energy – and demand-side innovation.
The AEMC says a reliable system needs an adequate supply of dispatchable ‘on demand’ energy. In addition, it needs transmission and distribution networks, and a secure operating state.
Dispatchable energy can be supplied through:
- Generation, including large-scale coal, gas and, and battery storage
- Demand response and other demand-side mechanisms; for example when customers are paid to cut consumption.
Investment decisions made by market participants on the basis of future prices and potential risk also affect a reliable electricity supply.
New energy generation needs a new framework
The changing generation mix includes non-dispatchable variable generation, such as rooftop solar energy. The AEMC believes the exit of traditional thermal generators – coal and gas-fired plants – threatens the availability of dispatchable energy.
The review will take into account lessons from initiatives such as the demand response pilot program being trialled by the Australian Renewable Energy Agency (ARENA) and the Australian Energy Market Operator (AEMO).
It will also consider recommendations from the Finkel Review such as the Generator Reliability Obligation, day ahead markets and mechanisms to address demand response priorities.
The intervention mechanisms AEMO has at its disposal to address potential shortfalls of supply will also be a focus of the review.
Energy stakeholders to provide review input
AEMO, the AEMC’s Reliability Panel, ARENA, the Clean Energy Regulator and the Clean Energy Finance Corporation will provide input into the review.
Furthermore, the AEMC will establish a technical working group, including representatives from:
- Conventional and renewable generators;
- Demand response providers;
- Large energy users; and
- Consumer groups.
Stakeholders can comment on the issues raised in the paper. Submissions are due by September 19 2017.
The COAG Energy Council will receive a progress report on the review by the end of 2017, with a final report due in mid 2018.