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New Energy Insights: The Integrated Resource Provider – a Window to the Future

This article is part of our New Energy Insights series from our Energy, Infrastructure and Resources team. Stay tuned for regular updates and commentary on topical issues across the sector.


In this third part of our three-part series considering the proposed introduction of the new integrated resource provider (IRP) category in the NEM, we take a holistic view of this seismic change to the market.

We consider how this change will shift the landscape of the National Electricity Market (NEM) over the medium and long term, how participants will need to adapt and evolve to survive, and the opportunities available to those that react quickly and decisively.

Standalone energy storage gets (a little) easier

Registration for battery energy storage systems (BESS) and hybrid systems in the NEM will be much easier. Instead of being required to register as both a market customer and market generator, a single registration as an IRP will be required and a new classification category of integrated resource unit (IRU) created to classify energy storage.

When participating in dispatch, a single bid instead of two separate bids (one from each registration category) will be required.

Registration as an IRP also removes (in all but extraordinary circumstances or at enormous scale) the risk that the Retailer Reliability Obligation will be imposed on an energy storage system as energy consumed and exported will be netted and hence the risk net consumption will exceed 10GWh in a year is very low.   

However, the bankability of the arbitrage play will remain difficult (absent significant “offtake capacity” contracts to underwrite cashflows). The arbitrage market will arguably be capped as the amount of intermittent generation (ie solar and wind without BESS) stops growing (and even reduces as those projects add BESS in order to avoid generating during low market prices).

Demand for market services such as Frequency Control Ancillary Services (FCAS) created by these generators will also reduce as they add BESS and internalise the cost of managing the quality of their generation. Increased unreliability of failing coal fired generators will provide some demand until those generators retire. We are seeing the owners of large coal-fired generators contract the capacity of large batteries or develop and own their own batteries as a hedge against the forecast cost of the ever-increasing unreliability of their coal fired generators.

The end of system charges based on net energy?

In the draft determination, AEMC proposes a significant change to the way non-energy costs are determined which will change who currently pays and is paid for providing system support services.

Instead of net energy consumed, non-energy cost recovery would be based on a participant’s gross energy flows, ie gross consumed or exported energy during relevant intervals rather than the category a participant is registered in.

Consumed and sent out energy will be measured separately and not netted at the connection point, or among connection points. Importantly energy that is both produced and consumed behind a connection point will not be included for the purposes of calculating non-energy costs, for example, rooftop solar production that is consumed behind the meter will not be included.

The new calculation is in part facilitated by the additional data which will be measured as part of the implementation of the Global Settlement & Market Reconciliation rule in May next year.

This change is another recognition that the National Electricity Rules were designed for single direction energy flows where the amount of energy a participant consumes or generates is a good proxy for the system costs of that generation or consumption. The bi-directional energy flow inherent in energy storage means that proxy is no longer valid. The change will further encourage generators to manage their demand for non-energy services through actively managing their generation. In particular, it further supports the business case for installing relatively small capacity BESS as part of any renewable energy generator in order to manage demand for non-energy services (and avoid being charged for those services).

No seat at the table

AEMO has chosen not to ensure energy storage and hybrid system representation on AEMC’s Reliably Panel (Panel). The Panel is charged with monitoring, reviewing and reporting on the safety, security and reliability of the national electricity system and advises AEMC in this regard.

Given this purpose and the importance energy storage and hybrid systems will play in the future of the NEM it is difficult to reconcile how the perspective of energy storage and hybrid system owners is not relevant to the safety, security and reliability of the national electricity system. It is even more perplexing in the context of the proposed rule changes which will significantly encourage more energy storage and hybrid systems into the NEM.

Surely the Panel’s review of the reliability standard and settings due in April next year would benefit from the perspective of market participants who represent the fastest growing form of generation and will be critical to ensuring reliability of the network – they will be the ones keeping the lights on.

A window to the future

The proposed rule changes provide a window to the future of the NEM – a market where renewables are the dominant source of generation and energy storage provides the reliability and system support to keep the lights on 24-7.

In so doing, it anticipates the many challenges to be overcome in this transition, identifies the complexities of redesigning the market and highlights that there will be winners and losers from the transition to a decentralised, renewable dominated, demand responsive, technology driven market.

Significant changes are coming and the NEM is going to be a very different place. Those that anticipate and capitalise on the opportunities arising from these changes will dominate the future. Those that close the blinds and ignore the future will go the way of the dinosaurs.


The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, construction, including the buying and selling of development and operating projects.

Matt Baumgurtel leads the New Energy sector team at Hamilton Locke which specializes in renewable energy, energy storage and hydrogen projects and transactions as part of the firms Energy, Infrastructure and Resources practice.

David O’Carroll is an associate in the Hamilton Locke Energy Infrastructure and Resources team and specializes in renewable energy projects including wind, solar, energy storage and hydrogen.