Thought leadership from our experts

Australian Advances in Electricity Regulation and Technology

Australia's national electricity system is facing some challenges, including as a result of recent power system security issues. However, 2017 also promises to be an exciting year for innovation and reform in the Australian electricity sector. This article outlines some recent key regulatory reforms to Australia's National Electricity Market before highlighting three key technological advances which are destined to transform the way in which the Australian electricity industry operates.

Electricity market reforms

In 2011 the Australian Energy Market Commission (AEMC), at the request of Federal, State and Territory energy ministers, launched the 'Power of Choice' review into the National Electricity Market (NEM), which operates across Australia's eastern states and territories (Queensland, New South Wales, the Australian Capital Territory, Victoria and Tasmania) and South Australia. The AEMC ultimately recommended various changes to the NEM at both state and federal levels, with a particular focus on improving the responsiveness of the NEM to advancements in technology.

A number of key recommendations in the Power of Choice review have been implemented through changes to the National Electricity Rules and the National Energy Retail Rules. For instance the 'customer access to information about their energy consumption' rule change made it easier for consumers to obtain information about their electricity consumption from both retailers and distributors. A 'distribution network pricing arrangements' rule change also now requires distributors to set cost reflective network tariffs as part of economic regulatory reforms (for background, see the 2015 report by the Consumer Utilities Advocacy Centre on 'Cost Reflective Pricing').

Significant changes to the regulation of 'metering services' (which include services to ensure a customer has a working meter and providing the relevant parties with metering data for billing) will also commence on 1 December 2017. The new rules, which will permit a much wider range of providers to be able to offer metering services to retailers and large consumers, are designed to 'facilitate a market-led approach to the deployment of advanced meters' to 'promote innovation and lead to investment'. These changes are expected to be the first of many to help enable the NEM to adapt to future technological advances. A few examples of these advances are described below.

Technology and innovation

Advanced metering technologies

The introduction of advanced metering infrastructure (or 'smart meters') is transforming the way Australian businesses and households interact with the electricity industry. The state of Victoria has led the way in Australia, with the mandatory introduction of smart meters to all Victorian households and businesses since 2009.

The smart meters are up to date two-way, digital communication systems that record electricity usage every 30 minutes and automatically send this data to a customer's electricity retailer or distributor. Major benefits include customers being able to access accurate and more sophisticated information about their electricity usage, thereby having greater control over their electricity consumption. There are also ancillary benefits for other technologies, such as battery storage (which is discussed further below).

Smart meters look set to become a bigger part of the Australian electricity landscape into the future, with other states engaging in voluntary rollouts. For example, in March 2016 the State of New South Wales established a new metering safety and compliance regime. These changes are in addition to the new (national) rules for metering services discussed above.

Energy storage

Energy storage is a rapidly developing technology throughout the world and is a significant area for focus and investment in Australia. According to the Climate Council, an Australian non-profit independent organisation, Australia is in the near future projected to become one of the largest markets for battery storage due in large part to its high electricity prices and extensive solar resources. (See, for example, the Climate Council's report on Battery Storage for Renewable Energy and Electric Cars).

Energy storage technology enables the storage of electricity, for example from a renewable generation system or within the electricity grid, for use at a later time. The technology, with the aid of innovative complementary software, has the potential to solve multiple issues affecting the generation, transmission and distribution of electricity, including problems caused by the intermittency of renewables, voltage and frequency fluctuations and the need to manage peak demand periods. Core areas of opportunity which have already been identified for energy storage in Australia are 'behind the meter' applications (which will capitalise on Australia's high uptake of renewable generation systems), as well as off-grid areas in remote locations (a particular problem in Australia given its vast geography).

With the expected increase in the use of energy storage in the next few years, Australia will need to start addressing gaps in both national and state policies, as well as regulatory frameworks. For example, gaps have already been identified in technical and safety standards, as well as regulatory arrangements governing how energy storage systems will be installed, maintained and operated. In addition to this, the AEMC has also begun considering a range of barriers and regulatory issues associated with the uptake of energy storage. For more information, see the AEMC's report on 'Integration of Energy Storage: Regulatory Implications'.

Virtual power plants

Virtual power plants (VPPs) utilise renewable energy generators (e.g. household solar PV panels, wind generators etc.) and storage batteries which are dispersed over wide areas and linked by technological systems at a central location. Energy output at each location is monitored and controlled to turn 'a collection of separate, fluctuating power sources into one smooth, reliable energy source' (see the 'Virtual Power Station' case study by the CSIRO, an Australian Government entity). Further benefits of VPPs include the movement away from large centralised power plants which in turn reduces the costs of, and electricity loss associated with, transmission and distribution.

Australia's first VPP is currently being rolled out in South Australia as a partnership between the Australian Government's Australian Renewable Energy Agency (ARENA), AGL Energy (an Australian energy company) and Sunverge (a US-based energy storage and management company). The project will result in 1,000 connected batteries being installed in homes and businesses. The VPP will be able to store 7 MWh of energy and provide 5 MW of peaking capacity. For more information on the project, see ARENA's webpage on the project.

Market regulation in Australia will need to adapt to the introduction of VPPs. Germany, who is ahead of the curve with VPPs, provides a good case study for Australia of the challenges involved in fitting VPPs into existing regulatory conditions. Notably, VPP models had to be changed in Germany so they could participate in the market. Similar hurdles to market entry are likely to apply in Australia. For example, the Australian Government's Clean Energy Council has already identified the lack of a market mechanism for aggregating the services of distributed generation.

Into the future

The future of energy innovation in Australia is bright. Australia is recognising the need to adapt its regulatory frameworks to support these new energy technologies. The key focus for Australia is to create a flexible market which maximises the benefits of new technologies in both the short and long term, while also addressing the challenges of integrating new technologies into the prevailing electricity market and regulatory structures that have been progressively assembled over the past two decades.