In August 2021, Hamilton Locke published a comprehensive three-part analysis (read Part I, Part II, and Part III) on a draft determination of the Australian Energy Market Commission (AEMC). The AEMC’s draft determination proposed to change the National Electricity Rules to create a new market participant category and generation asset classification in the National Electricity Market (NEM), called the Integrated Resource Provider (IRP) and the Integrated Resource Unit respectively.
The AEMC’s reforms are arguably the most significant changes to the NEM since its creation. They are driven by the growing trend of bi-directional energy generation, mainly due to the growing implementation of Battery Energy Storage Systems (BESS) in the NEM. The changes aim to facilitate the registration and participation in the NEM of grid-scale batteries, aggregators of smaller batteries, and new business models with a mix of technologies behind the connection point.
Integrating Energy Storage Systems
The “National Electricity Amendment (Integrating Energy Storage Systems into the NEM) Rule 2021” (IESS Rule) was published on 2 December 2021. The IESS Rule, which comes into effect on 3 June 2024, is intended to streamline the registration process for hybrid generators in the NEM. Instead of registering separately as a ‘Generator’ and ‘Market Customer’, they can now register under the consolidated IRP category.
The “National Electricity Amendment (Implementing Integrated Energy Storage Systems) Rule 2023” (2023 Rule), published on 4 May 2023, is designed to implement the IESS Rule. While the 2023 Rule became operative on 11 May 2023, as most of the amendments made by it are to the IESS Rule, these amendments will only practically take effect in June 2024 (alongside the IESS Rule).
Key Changes
| Change | Description | Status |
| Small Generation Aggregators providing FCAS | Aggregators of small generating and storage units can now provide ancillary services (if they choose to do so). | Implemented on 31 March 2023. |
| Aggregated dispatch conformance | Aggregate systems can choose to register for Aggregated Dispatch Conformance (ADC).
ADC provides an aggregate system with the flexibility to conform to its dispatch instructions by dispatching energy at the connection point from any combination of its units (with some restrictions), rather than individually on a unit-by-unit basis. This includes minor changes for BESS. AEMO will be using the ADC mechanism to monitor net dispatch conformance for a BESS across its scheduled generating unit/scheduled load pair, as a target aggregate. |
Implemented on 9 August 2023. |
| IESS retail and settlement changes | Significant changes to the calculation method to be used for non-energy cost recovery:
· Recovery calculations are to consider the gross energy amounts (consumption separate from generation) of all participants, rather than the current approach using net energy (generation – consumption) of specific participant types; and · Major settlement database structure changes are required to enable the new calculations. These changes will flow into the data model and affect: o Participant reconciliation and reporting activities; o AEMO data provision; and o Embedded network management changes to ensure that the parent has the appropriate gross energy volumes available for settlement. |
Implementation date of 2 June 2024. |
| IESS registration, classification, and bidding changes | Introduction of IRP participant category and Bi-Directional Unit (BDU) bidding, scheduling, and participation. | Implementation date of 3 June 2024. |
Source: AEMO
Implications
- Transition: Until 3 June 2024, a participant that registers and classifies a facility that is, or will be, an Integrated Resource System (IRS) will have its application(s) assessed under both the current and new rules, to facilitate a transition into the new registration categories from the effective date.
As such, any participant seeking to register a storage or hybrid facility between now and 3 June 2024 should familiarise themselves with the new arrangements that will apply through this interim period.
The AEMC has taken care to avoid unintended transition consequences and costs – existing connection agreements, performance standards, and service levels should continue to apply, and no registration fees are payable to transition existing registrations.
- TUOS: One of the most controversial elements of the AEMC’s final rule determination was maintaining the current arrangements for transmission charging (TUOS) for storage systems. Stakeholders advocating for storage systems to be exempt from TUOS charges highlighted the benefits that storage systems provide to the grid and raised concerns about energy being ‘double-charged’ (i.e. once when entering storage and again when being consumed).
The AEMC has stated that a broader review is needed to consider how the network charging framework should better account for flexible, price-responsive loads. It stated that it was not mandating that storage systems be subject to TUOS charges, but that it would need to consider the network pricing model for flexible loads that can respond to dynamic price signals to support the management of network congestion.
- Recovery of non-energy costs: Non-energy costs are expenses related to maintaining and managing the energy grid, such as maintenance, administration, and infrastructure. The traditional way of deciding who pays these costs was based on the type of energy user (participant classification).
However, the introduction of the concept of adjusted sent-out energy and adjusted consumed energy as two new data streams for the recovery of non-energy costs suggests a fairer approach. Instead of just looking at who uses the energy, it focuses on how much energy is actually used.
- DC coupled systems: The IESS Rule clarified the classification of bidirectional units within an IRS, allowing such units to be categorised as scheduled generating units, semi-scheduled generating units, or non-scheduled generating units. However, the 2023 Rule has removed the option to register DC coupled, bidirectional units as semi-scheduled due to non-use of the category.
- Improvements and clarifications: The 2023 Rule introduced amendments to improve the implementation of the IESS Rule, offering clarity on classifications such as market points, ancillary service units, and the possibility of an IRP acting as a small resource aggregator.
The Road Ahead
While the IESS Rule and the 2023 Rule mark significant strides in accommodating distributed energy resources in the NEM, further transformative actions are required for the NEM to become a dynamic yet stable energy market capable of meeting the country’s electricity needs.
Embracing more radical measures, such as market redesign to prioritise variable and distributed energy resources while aligning objectives with the needs of all electricity consumers, could pave the way for a more sustainable energy future.
For more information, please contact Matt Baumgurtel or David O’Carroll.
