6
State of research and barrier analysis
Realisation of residential energy flexibility relies on: 1. utilities and others making tariff and incentive products available to households; 2. households taking up those products (switching to the tariff, participating in the scheme, etc.) 3. and households responding to the incentives (shifting loads to off-peak periods, reducing peak demand, etc.) There are multiple influencing factors that can facilitate or impede provision of incentives, user uptake and reducing response. They can be broadly categorised into regulatory and market considerations, metering and control technologies, social, cultural and behavioural issues, informational and communication issues. Residential energy flexibility can also deliver net system benefits, and this section also discusses the extent to which current research and industry development activities effectively assess these benefits.
6.1
Regulatory considerations
The regulatory environment within which DER operates is a rapidly moving feast. The focus of this section is on potential regulatory barriers to making tariff and incentive products available to households. It does not cover the regulatory barriers related to, for example, aggregators enabling households to provide network support or participate in spot or FCAS markets, including the ‘trader-services model’ recently proposed by the AEMC. Likewise, it does not extend to more general barriers to the uptake and operation of DER resources, such as the AEMC Rule Determination on minimum technical standards for DER and the South Australian Smarter Homes initiative, the use of Dynamic Operating Envelopes or more efficient forecasting and scheduling of DER. These are already the focus of a significant number of workplans underway through both the Post 2025 and AEMC market design processes 31; and many are expected to be covered in the RACE for 2030 Projects H3 ‘Using Home Energy Technologies for Grid Support’ and N4 ‘Distribution System Operator and Beyond: Optimising planning and regulation for DM & DER’. 32 Given the ongoing and constantly changing nature of the regulatory environment within which DER operates, it is likely that RACE2030 will need to frequently (monthly or quarterly) reassess this environment for how it impacts on the need for and relevance of particular research projects.
6.1.1
Electricity networks
Distribution Network Service Providers (DNSPs) 33 in the NEM operate as regulated monopolies. 34 Network operators in Western Australia and the Northern Territory are regulated under different regimes, which are much more permissive than in the NEM, especially Horizon Power in WA which operates as a vertically integrated entity (includes generation, networks and retail). The most relevant aspects here are: 1. Limitations placed on DNSPs participating in competitive markets Where DNSPs are regulated monopolies, they are not allowed to participate in competitive markets, which would for example include any related to the provision of electricity flexibility services. However, this should place little or no restrictions on households engaging in electricity flexibility because i) third parties can do this and ii) many DNSPs have developed ring-fenced arms (such as Yurika (for Energy Queensland) and Mondo (for Ausnet Services)) that are able to access competitive markets. Moreover, removing this
More information is available here https://esb-post2025-market-design.aemc.gov.au and https://www.aemc.gov.au/ourwork/market-reviews-and-advice 32 For a recent review of these issues (that are constantly evolving) see the ESB’s ‘Post-2025 Market Design Directions Paper, Jan 2021, as well as https://esb-post2025-market-design.aemc.gov.au. 33 Transmission Network Service Providers (TNSPs) do not interface with residential end-users and so are not covered here. 34 It is worth noting that although monopolies are defined as not facing competition, DNSPs do in fact face competition from DER for the provision of network services. 31
Opportunity Assessment – H4: Rewarding flexible demand: Customer friendly cost reflective tariffs and incentives
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