The Australian Energy Market Commission (AEMC) will press ahead with plans to let large customers trade their energy use in the national electricity market recognising it is a landmark reform that must be prioritised, even with COVID-19.
AEMC CEO, Benn Barr, said the commission considered requests to delay this reform but decided to keep moving forward.
“Despite COVID, we still need to keep prices down, keep the market working efficiently and work to lower emissions in the energy sector,” Barr said.
This reform, which is known as the Wholesale Demand Response Mechanism (WDRM), encourages large customers to reduce their electricity consumption in the short-term in response to wholesale market price signals.
It works by scheduling this demand into the market in the same way an electricity generator’s supply would be scheduled in.
This new way of operating recognises that not using electricity should routinely attract a market value and creates another tool to help balance energy supply and demand.
It is potentially a much cheaper way to address sudden spikes in demand than sources of peaking generation such as gas or pumped hydro. In effect, it is an affordable new tool for managing energy security and reliability.
It is also important because it is a stepping-stone to Australia achieving a two-sided energy market – where all consumers (large and small) would be able to fully participate by actively trading their energy use as a valuable commodity.
This means the grid will eventually see much greater benefit from the distributed energy resources used by households, such as solar panels, batteries and electric vehicles.
“We are taking a sensible, stepped approach to a two-sided market by first allowing larger energy users to routinely trade their energy use in the wholesale market,” Barr said.
“Once the two-sided market is up and running, we can retire this wholesale demand response mechanism because it will no longer be needed.”
The Commission is already working on a two-sided market design as part of the Energy Security Board’s 2025 reforms. In the interim, small consumers can still take part in the numerous demand response trials being run by governments and retailers, including rebate schemes and virtual power plants.
The Commission released its draft rules on wholesale demand response in March.
Energy Efficiency Council (EEC) CEO, Luke Menzel, welcomed the decision.
“Kudos to the AEMC for pushing ahead with this crucial reform, and congratulations to the passionate advocates that have driven the conversation over the last decade,” he said.
“The hard work has paid off, and resulted in a rule change that will deliver lower energy bills for everyday Australians.”