The Australian Energy Market Commission (AEMC) has released a draft rule which would allow large energy consumers, such as energy thirsty manufacturers, to sell back unneeded demand to the wholesale energy market.
According to the AEMC this means that energy aggregators will be able to compete with energy retailers to reduce the wholesale price of energy.
Until now, energy consumers have had to go through their retailers, which are not at an incentive to use this demand response mechanism.
“Right now, only retailers can offer this service. New businesses wanting to enter the market, and some consumers, say retailers haven’t done enough to encourage demand response. On the other hand, retailers say change is underway and that adding new players will end up costing consumers more,” said AEMC chairman John Pierce.
According to Pierce, this change was directly driven by the needs of manufactures who use large amounts of energy.
“This draft rule is all about large commercial and industrial consumers in the wholesale market who can now participate directly in the wholesale market by offering in demand reductions. These are times in which those consumers have agreed not to consume electricity or consume less or later,” said Pierce.
The AEMC outlined that if the mechanism is approved, commercial and industrial electricity customers can sell a reduction in their consumption when wholesale prices are higher. During these peak periods, energy aggregators would bid a reduction in demand into the market. This would undercut the cost of generation and forfeited demand from large consumers would be used by the rest of the market.
With large power stations such as Liddell due to close in 2022, this change would allow the market to establish the lowest cost and most efficient way of meeting supply.
“Technology is developing fast and changing the economics of the market. It won’t be long before digitalisation gets to the point where a truly two-sided market is possible. That’s a market where consumers actively manage their decisions to consume or not consume,” said Pierce.