Understanding the Implications of AEMO’s Unlocking CER Benefits Through Flexible Trading Rule Change Request

AEMO has requested a rule change to allow more flexible connection and trading arrangements for Consumer Energy Resources (CER) to unlock greater value for consumers and benefits for the network, with widespread implications for consumers, retailers, network businesses, VPP and EMS providers, regulators and metering companies [1].

The rule change proposal

Consumers continue to take up CER at rapid rates, with the trend predicted to continue with more smart appliances, increased PV installations, and the dawning of the electric vehicle era.

As part of its ongoing work in this area, the Energy Security Board (ESB) has recognised flexibility for consumers in how their CER are connected and identified in the market as one of its priorities in its 27 July 2021 paper: Post-2025 Market Design: Final Advice to Energy Ministers Part B.

In response to the ESB’s request in its July 2021 paper, AEMO submitted the Unlocking CER Benefits Through Flexible Trading rule change request to the AEMC in May 2022. AEMO’s premise for the rule change is that consumers can potentially unlock greater value from their CER by separating inflexible loads from flexible loads and generation across multiple financially responsible market participants (FRMPs) – which may be retailers, aggregators or other innovative service providers – including through being compensated for providing network support services from their flexible loads and greater participation in current and emerging energy markets.

While consumers can currently elect to have multiple connection points through the installation of additional metering, the ESB and AEMO contend that this creates a barrier due to the cost and complexity of creating a second metering installation. Instead, AEMO has proposed separate identification of load types through the creation of ‘secondary’ settlement points for CER behind current ‘primary’ metering installations.

The customer, be they residential or commercial, will then have the choice of how to contract for each load (or their generation). For example, a customer may choose to contract with a different FRMP for their non-flexible load and a separate FRMP for each CER device, or they may elect to have two FRMPs, one for the non-flexible load and another for all CER. Alternatively, a customer may see value and convenience in sticking with a single provider that can offer different pricing signals (tariffs) for each load type and/or device type.

To achieve this secondary settlement point model, AEMO has proposed a new category of ‘minor energy flow meter’ that would be used at secondary settlement points and, potentially, for currently unmetered loads such as streetlights and parking meters.

In response, the AEMC sought feedback on the value consumers are looking to extract from their CER, consumer motivation for taking up CER, the offers from retailers and aggregators to unlock CER value streams for consumers, the barriers to unlocking value from CER and creating the necessary flexibility under the current single connection point model, and the benefits and challenges of having multiple FRMPs at a single premises for consumers, retailers and networks.

The AEMC also sought feedback on how flexible trading should be introduced, proposing four potential models:

• Improving current arrangements (i.e., no significant change);

• Parallel metering (as per the failed Multiple Trading Relationships rule change request);

• Expanding multi-element metering (similar to how hot water heaters are metered today); and

• Sub-metering (as per this rule change).

Submissions closed on 16 February 2023, with 44 submissions being received. The Draft Determination is due at the end of August this year.

We intend to follow this rule change process closely and provide updates as it progresses.

What does this mean for your business?

This is a key CER reform and a highly complex area that has the potential to advance CER uptake by adding tangible value streams for consumers, networks and providers of VPPs, EMSs, metering services and other innovative technology solutions (both platform and hardware).

While AEMO’s proposed model presents an opportunity for vastly increased flexibility for consumers, it also comes with considerable complexity as it fundamentally alters the fabric of the traditional one-to-one relationship between customer and FRMP. This has implications for competition, consumer protection frameworks, network use, cost allocation, market registration requirements, and communication and interoperability standards, amongst other considerations.

Should the AEMO proposal be adopted, there will be a significant opportunity for new and expanded business models for VPP coordinators, providers of EMS, as well as other innovative companies seeking to extract value from CER at the device level under new business models.

It will also provide opportunities for Metering Coordinators, Metering Providers and Metering Data Providers in relation to these secondary settlement points. This may be through an expansion of their current functions, or through the creation of new roles which these established service providers are naturally equipped to perform, such as the supply and installation of approved “minor energy flow meters” and the management and control of additional metering data by Metering Data Providers. Further to this, there may be opportunities for new business models to emerge that package metering with VPP and EMS solutions.

Governments and regulators will also need to carefully consider how these changes will impact upon, and integrate with, other rule change processes, such as the Scheduled Lite Mechanism[2], and broader policy reforms and jurisdictional incentive schemes, such as EV policies and community batteries.

How Can Rennie Help?

At Rennie, we are keeping a close watch on the advances in CER from a technological, market and regulatory point of view.

We continue to work with businesses and regulators right across the CER value spectrum, from VPP and HEMS providers, to energy and metering companies, and network operators, providing regulatory and market analysis to advise on what the future looks like in this ecosystem, current and emerging value pools, and how to navigate and take advantage of the evolving CER landscape.

Want to know how Rennie can help your business navigate the high-CER, net-zero future? Contact us today.

If you would like support navigating the gas transition, please contact Simone Rennie at srennie@rennieadvisory.com.au.

[1] VPP – Virtual Power Plant; EMS – Energy Management System

[2] The Scheduled Lite Mechanism would allow flexible resources, such as VPPs, to voluntarily take part in AEMO’s market scheduling processes. See here for further details.

Photo by Giorgio Trovato on Unsplash

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