Wholesale demand response is a proven technology that is used around the world to reduce electricity consumption during demand peaks. It sees energy consumers sell reductions in demand at specific times, receiving payment, cutting their cost of energy and also reducing the price paid by all consumers.
Demand response has many benefits including increasing competition, reducing the cost of electricity and improving grid reliability. The International Energy Agency states that the reliability services from demand response are also valuable in managing the safe retirement of coal-fired power stations.
While proposals have existed in Australia since the 1990s, only now has the Australian Energy Market Commission (AEMC) has released a draft rule change that would allow wholesale demand response in Australia. This is based on a rule change request by The Australia Institute, Public Interest Advocacy Centre and Total Environment Centre in August 2018. This proposal would allow participating consumers to contract demand response services to a third party.
The Australian Energy Council (AEC), which represents all the major generators and retailers, opposes this reform. The AEC has proposed its own rule for wholesale demand response which would see energy retailers remain as the gate-keepers of demand response. While wholesale demand response would still enter the National Electricity Market, consumers would not be free to contract with a third party demand response aggregating firms without permission from their retailer.
The ACCC has rejected the AEC ‘gate-keeper’ model, because it is anticompetitive and would harm the interests of energy consumers.
The three biggest electricity markets in the world are moving to open up markets to demand response competition: China, the United States of America and the European Union.
While the Federal Government support the ACCC’s recommendations in general, it has been largely silent on wholesale demand response competition since former Energy Minister Josh Frydenberg spoke supportively in 2017.