The Public Interest Advocacy Centre, The Australia Institute and Total Environment Centre have today welcomed a draft rule by the Australian Energy Market Commission (the Commission) that will increase competition in the wholesale energy market, lower emissions and prevent blackouts.

Wholesale demand response is a system where the Australian Energy Market Operator (AEMO) pays energy users to cut their energy use, instead of turning on more expensive generators, when demand and wholesale prices are high. Energy users involved receive a direct financial benefit, but all consumers benefit from downward pressure on wholesale prices.

In August 2018 the three organisations sponsored a rule change request to the Commission to allow a new category of energy market participant – a demand response service provider – to compete against generators in the National Energy Market. Today the Commission published its draft rule.

The three groups welcomed the draft rule, which includes the three foundational principles they proposed:

• Consumers are free to do demand response through new, dedicated demand response companies
• Demand response is treated as equal to conventional electricity generation in the wholesale market
• Demand response is dispatchable by the Australian Energy Market Operator and transparent to the market

Dan Cass of the Australia Institute said, “Australia has a peak demand problem that means households, businesses and farms are paying too much for electricity. High peaks during heatwaves put reliability at risk and the AEMC has recognized that demand response is a smart, efficient solution. The three biggest electricity markets in the world – China, America and the EU – are pursuing similar reforms and Australia must keep up.”

Craig Memery of the Public Interest Advocacy Centre said, “The AEMC has carefully considered how to implement the best rule that will provide the most benefit to consumers. A demand response mechanism is a necessary innovation and will be important for maintaining reliability as Australia’s 20 coal plants retire.”

Mark Byrne of Total Environment Centre said, “Wholesale demand response pushes down prices for all consumers and puts money in the pocket of consumers who can reduce their demand for short periods on peak days. Much of the time they won’t even notice, as the process will be automated and controlled by specialist aggregators. The only losers from this reform are the energy companies that want to dominate the generation and retail markets and keep prices high.”

The groups noted the rule stipulates households would not be allowed to participate in wholesale demand response until consumer protection and retail rules are refined. They called on the Commission to work with other energy and competition agencies and the Council of Australian Governments to ensure that households are able to participate by 2022 at the latest.

The draft rule is open for consultation for eight weeks. The three rule sponsors will continue to participate in the AEMC’s Technical Working Group, which will refine the design. The AEMC is expected to make its final, binding determination in December 2019.