Australian Energy Market Commission

Making Market Transformation Work

Overview 2016-2017

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The changing mix in generation sources means we have to manage the power system differently and evolve the market. There is no silver bullet. There are many options we could take. But we need to understand how different solutions would interact with the rest of the system; affecting prices, reliability and security. Decisions made today will affect national economic development for decades to come. The AEMC is changing the energy market design so it can deliver more reliable, secure capacity and help keep bills affordable.

Our deep commitment to building an enduring, effective dialogue with our stakeholders is how we strive to make market transformation work in the long-term interests of consumers. Everything flows from the quality of those relationships and the quality of informed debate. We look to stakeholders to test our thinking and establish common understanding for the development of regulatory frameworks which can deliver the best value and security for families and businesses as the energy revolution unfolds.

We are changing the energy market design

Giving consumers more choices

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Giving consumers more choices

Building better gas markets

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Building better gas markets

Keeping the lights on

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Keeping the lights on

Integrating emissions policy

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Integrating emissions policy

Giving consumers more choices

Every day we see new energy services in the market. Like smart phone apps to control appliances, incentives to cut waste by reducing demand at peak times, and commercial properties using built-in generators powered by local renewables. Our power of choice reforms are helping people monitor, manage and adjust the ways they use electricity.

Consumers driving market change

Consumers driving market change

Our power of choice reform program is all about

  • Better consumer information and tools so people can choose retail deals that suit them best.
  • Opening the market to smarter metering and technology
  • Poles and wires reform so price signals can show consumers where savings can be made and investors can see the true costs of providing power.

Consumer blueprint

Consumer blueprint

The AEMC consumer blueprint is updated every year in our annual competition review – following the first one in 2013.

The most recent recommendations were made to industry and governments in July 2017.

Help people understand their usage and spending

Help people understand their usage and spending

Develop market-wide awareness to make energy shopping easier.

Improve information on cost savings, and expiry of benefits on contracts.

Help vulnerable customers move to competitive market offers and away from higher priced standing offers.

Distributors and retailers to streamline collection of consumption data so better pricing options can be provided.

Better comparison tools so it’s easier for consumers to choose the best deal for them

Better comparison tools so it’s easier for consumers to choose the best deal for them

Improve and promote government comparison websites like energymadeeasy and victorianenergy saver; include more plain English fact sheets to simplify and standardise information.

COAG Energy Council of ministers to give additional support to those who need it

COAG Energy Council of ministers to give additional support to those who need it

Improve awareness of energy concessions.

Look at how consumer protection frameworks need to evolve given increased diversity of new retailers and energy entrepreneurs in the market.

Harmonise government regulatory arrangements to reduce costs for retailers which operate nationally.

Read more about the AEMC’s work program to promote competitive energy services

Read more about the AEMC’s work program to promote competitive energy services

Building better gas markets

It is more important than ever for the COAG Energy Council to achieve its vision of a liquid wholesale gas market, with an efficient and transparent reference price. Ministers have agreed to our proposals for two wholesale gas trading hubs, along with other measures to make it easier to buy and sell gas across the whole east coast.

Gas is a vital source of energy and system security

Gas is a vital source of energy and system security

Natural gas accounts for around a quarter of Australian energy consumption.  The pivotal role of gas in the economy is set to grow. Gas generators can quickly vary their output, helping to integrate wind and solar into the power system. They are both dispatchable and synchronous. So they can help maintain power system reliability and security even as coal generators exit the market.

Redesigning gas markets to strengthen the national economy

Redesigning gas markets to strengthen the national economy

Read about our reforms to the east coast gas market

Building on this work, the AEMC is now reviewing the National Gas Rules to address concerns that customers may be paying more than necessary for gas pipelines. This work builds on last year’s major review by the ACCC into the competitiveness of wholesale gas prices, which found that regulated pipelines may be charging monopoly prices.

The AEMC will develop recommended actions and publish its findings in a draft report in February 2018.

Making it easier to buy and sell gas in Victoria

Making it easier to buy and sell gas in Victoria

The next step towards a harmonised and well-functioning gas market was taken this year when the AEMC recommended trading improvements for Victorian gas.

When implemented, these changes will make it easier for buyers and sellers to manage risk and lower transaction costs; and improved gas trading between states will benefit everyone in the market.

These reforms could increase Australia’s GDP by a further $1.7 billion by 2040.

Read more about reforms to Victoria’s gas market

Keeping the lights on

The generation sector is changing with more renewables connecting and older thermal units retiring. This requires new ways of managing the stability of the power system.

Lowest cost security and reliability

Lowest cost security and reliability

Above all we want a secure and reliable power system that keeps prices as low as possible for consumers.

The generation mix of the power system is changing. The renewable energy target has encouraged more wind and solar to enter the market. At the same time coal generators are retiring and there’s more rooftop solar, microgeneration and battery storage.

Our priority work to address change includes

Our priority work to address change  includes
  • Our reviews into system security and frequency control frameworks
  • Gas market changes to support system security
  • Our reliability frameworks review
  • Reliability Panel work
  • Advice on effective integration of energy and emissions reduction policy
  • Our implementation of Finkel review recommendations

Priority work at a glance

Priority work at a glance

Our system security review was initiated in July 2016 to address the technological revolution underway in the national power system. We made a new framework to help protect the power system from emergencies with ‘last line of defence’ mechanisms like controlled load shedding. We followed this up with reforms to guard against technical failures that lead to cascading blackouts. There are new rules for AEMO and networks to provide minimum levels of inertia and system strength. The frequency control frameworks review is looking at ways to integrate new technologies and demand response to boost security.

Integrating emissions policy

Australia’s energy future will be cleaner. Power will be provided by a mix of energy sources as we reduce emissions from the electricity sector. The design of any mechanism to achieve emissions reduction must be integrated with energy policy so structural change can happen while keeping the lights on and reining in consumer costs.

Features of well-integrated policy

Features of well-integrated policy

Environmental policies that are appropriately designed and integrated can achieve their objectives while minimising costs for consumers. A well-integrated energy and emissions reduction policy has three features.

  • Technology neutral to allow for the greatest number of technology options in the market so there can be increased competition between generation sources and downward pressure on costs
  • Flexible enough to adapt to whatever supply and demand conditions the future might bring
  • Sustainable and consistent so investors in all kinds of generation can be confident that policy objectives can be met.

Importance of the contract market

Importance of the contract market

The contract market is the direct link between matching the financial incentives for generation assets investment with the physical needs of the system. Any mechanism for emissions reduction must enhance the role of the contract market to maintain reliability and security in the power system.

As existing generators retire, the volume of available hedging contracts have been falling. This combined with rising gas prices has increased the cost of doing business.

Project landscape

To see all projects since our establishment in 2005 see annual reports on www.aemc.gov.au

FY12
FY13
FY14
FY15
FY16
FY17
FY18

First strategic priorities report on what really matters for market development EMO0011

Annual market performance review of the power system for FY12 REL0050

Stronger incentives for transmission businesses to pursue efficient investments ERC0106

Enhancing future investment in transmission and generation EPR0019

Proposed national framework for distribution reliability targets EPR0031

Advice on costs and benefits of NSW electricity distribution reliability EPR0027

Reviewing generation’s ability to meet demand REL0049

Recommendations on reviewing unusual power system events REL0048

Annual market performance review of the power system for FY13

Giving consumers power of choice EPR0022

Lower cost ways to support electric and natural gas vehicles EMO0022

New obligations for networks to publish demand side engagement strategies ERC0131

New rules for AER to set efficient network costs ERC0134

Annual report on electricity price trends 2012

Reducing potential barriers to participation for small generators ERC0141

Improving the natural gas deviation pricing framework GRC0014

Role of jurisdictional standards on network reliability and security spending ERC0152

Implementing planning frameworks that provide for customer preferences on reliability EMO0026

Promoting efficient reliability investment in transmission networks EPR0028

Community consultation to help set distribution network standards EPR0033

Strategic priorities report on market development highlights consumer interests EMO0025

Annual market performance review of the power system for FY14

Bringing down barriers to connecting local generation ERC0147

More accurate metering data for consumers ERC0153

Helping customers change retailers more easily EPR0038

Proposed communication standards for new services enabled by smart meters EMO0028

Annual report on electricity price trends 2013

Consumer blueprint recommends energy info campaign RPR0001

More gas capacity information to increase investment efficiency GRC0024

Identifying areas for improvement in the east coast gas market GPR0001

Improving processes to restart the electricity network after large scale blackouts ERC0168

Strengthening reliability standard and settings arrangements ERC0160

New definitions to improve distribution reliability measurement EPR0041

Amended reliability settings REL0051

Annual market performance review of the power system for FY15

Increasing minimum ramp rate flexibility to expand dispatch possibilities ERC0165

Improving resilience in the face of financial shocks EMO0024

Strategic priorities report highlights need to integrate environmental and energy policy for a secure and reliable power system EMO0030

Submission on emissions reduction fund safeguard mechanism

More information for AEMO on demand side participation ERC0174

Network prices to reward individual energy consumption choices ERC0161

Connecting small embedded generators to the grid ERC0158

New arrangements for consumers to get their electricity consumption information ERC0171

Clearer information for consumers when they enter an energy contract RRC0001

Recommendations on energy sector competition policy frameworks

Annual report on electricity price trends 2014

Annual report on retail competition 2014

Annual report on retail competition 2015

More appropriate risk management practices for the Victorian DWGM GRC0027

Permanently extending the RERT safety-net feature for power system reliability ERC0198

More detailed information for AEMO to prepare demand forecasts ERC0184

Amended guidelines for last resort planning power EPR0047

Drovers of transmission and generation investment EPR0039

Annual market performance review of the power system for FY16

Making generator registration technology-neutral ERC0204

New B2B communications framework for advanced meters ERC0197

New meter replacement processes ERC0182

Giving embedded network customers a choice of service provider ERC0179

Stronger rules to deter false or misleading late rebids by generators ERC0166

Integration of energy storage in Australia SEA0002

Removing the metering monopoly and giving consumers access to competitive energy services ERC0169

New rules for a demand management incentive scheme ERC0177

Advice on implementing new communication standards for smart meters EMO0029

More accurate retail bills RRC0006

Annual report on electricity price trends 2015

Annual report on retail competition 2016

Roadmap to fulfil the ministers’ vision for an integrated east coast gas market GPR0003

Improving transparency in the east coast gas market GRC0033

Creation and allocation of credit certificates in Victoria’s gas market GRC0029

Producing Victoria’s gas market operating schedules GRC0034

Delivering a more stable power system to keep the lights on EPR0053

New framework to help prevent system-wide blackouts ERC0212

Updated guidelines to help AEMO prevent insufficient electricity supply REL0061

Services to restart the power system after widespread blackouts REL0057

New guidelines for reviews of the reliability standard and settings REL0059

Submission to South Australia’s select committee on the 28 September 2016 blackout

Submission to independent review into future security of the national electricity market

Impact assessments for new large generator connections ERC0205

Using competition to build new transmission at the best price ERC0192

Redusing emissions at lowest cost EPR0055

AEMC and Climate Change Authority advice on affordable, secure, lower emissions energy

Submission to the inquiry into retirement of coal fired power stations

Supporting customers transferred to new retailers without consent ERC0195

New obligations to identify alternatives to poles and wires investment ERC0191

Improving mechanisms for distributors to manage retailer default ERC0183

Improving the market participant suspension framework ERC0202
http://www.aemc.gov.au/News-Center/What-s-New/Announcements/Final-rule-to-improve-the-market-participant-suspe

First report on annual monitoring of electricity network regulation EPR0050

Submission on consumer protections relating to new energy products and services

Submission on regulatory arrangements for off-grid energy systems

Submission to COAG Energy Council consultation paper on storage registration

Annual report on electricity price trends 2016

Getting ready for the integrated gas market with a common gas day GRC0036

Making it easier to buy and sell gas in Victoria GPR0002

Keeping the system stable by maintaining system strength ERC0211

Simpler process for setting prices when the spot market is suspended ERC0224

Giving AEMO the right data to help with renewables integration ERC0219

Equipping the power system to stabilise its frequency ERC0214

Opening up competitive opportunities to help AEMO control system frequency ERC0186

Annual market performance review of the power system 2017

Introducing a market mechanism for inertia to maintain power system frequency ERC0208

Reviewing options to support a reliable supply of electricity as the power system transforms EPR0060

Frequency performance in the national electricity market EPR0059

Reviewing the suitability of the reliability standard and settings REL0064

The frequency operating standard in light of power system transformation REL0065

Strategic priorities for market development 2017

Identifying systemic issues that caused the South Australian system black EPR0057

Coordinating investment to add electricity supply at lowest cost EPR0052

Testing clean energy target designs SEA0025

Energy Security Board advice on the national energy guarantee

Improved liquidity in secondary trading of settlements residue ERC0220

Demand response services for a secure power system ERC0221

Demand response and new technologies to reduce network costs ERC0209

Options to give consumers more control over how they buy and sell power SEA0004

Annual report on energy retail competition 2017

Aligning market dispatch and five minute settlement ERC0201

More information for consumers on discounts and energy deals RRC0010

Supporting a competitive market for energy services contestability ERC0206

More choice and protection for embedded network customers RPR0006

More accurate market signals for the gas short term trading market GRC0042

More accurate natural gas bulletin board information GRC0040

Economic regulation of covered gas pipelines GPR0004

Your engagement with us

We are working more closely with stakeholders and other market bodies to evolve the Commission’s way of working in more timely ways. Over the past year we have operated differently to increase collaboration, combining work on related reviews and rules, and involving more working groups to help inform our thinking.

Overall ratings of AEMC's approach to consultation

Australian Energy Market Commission

Keep informed about AEMC activities www.aemc.gov.au