2. Intro to the NEM
• The National Electricity Market (NEM) is the wholesale electricity market and physical network
connecting the eastern states
• Key institutions:
• Australian Energy Market Operator (AEMO) operates financial market
• Australian Energy Regulator (AER) is responsible for regulating the physical network
• Australian Energy Market Commission (AEMC) makes rules regarding the NEM and is responsible for reform
• Council of Australian Governments’ (COAG) Standing Council on Energy and Resources (SCER) is responsible
for strategic direction
• The NEM is currently undergoing a wave of reforms, brought on primarily by rapidly rising retail
prices for electricity, caused by an unprecedented level of investment in network infrastructure,
i.e. the poles and wires
• Decentralised generation has an important role in dampening the peaks in demand that
necessitate this investment
• Greenhouse gas (GHG) emissions from the NEM constitute approximately 31% of Australia’s GHG
emissions
3. Current reforms
• a wide ranging overhaul of the incentives and mechanisms for encouraging
demand-side participation, including:
• the creation of a mechanism for allowing demand-side resources to be sold in the wholesale
market
• decoupling energy throughput and infrastructure expenditure from revenue
• gradual phase in of efficient and flexible retail pricing options
• installation of smart meters and the creation of a framework to provide for competition in
metering
• the AER’s Better Regulation program, aiming to deliver an improved regulatory
framework focused on consumers
• changes to the way network businesses are regulated
• increased consumer participation, largely through creation of new national body
• a National Energy Savings Initiative, a market-based tool for driving economy-
wide improvements in energy efficiency.
4. National Electricity Objective
The objective of this Law is to promote efficient investment in, and efficient operation and use
of, electricity services for the long term interests of consumers of electricity with respect to—
(a) price, quality, safety, reliability and security of supply of electricity; and
(b) the reliability, safety and security of the national electricity system.
• The lack of an environmental facet to the driving objective of the NEM has been a considerable
barrier to renewable energy
• Entrenches the status quo of fossil-fuelled generation.
• Recommendation
Local government and planning authorities will not be able to change the NEO, and the NEM
may present some barriers to renewable energy deployment. Such bodies must be cognisant of
other authorities in favour of renewable energy deployment, and ensure that they assist
renewable energy proponents to overcome this institutionalised hurdle.
5. Deployment models
• Large-scale, centralised generation using renewable energy resources
• Mid-scale generation
• Precinct energy systems
• Community Renewable Energy (CRE) projects
• Small-scale decentralised generation
• Remote and off-grid electrification
6. Planning law
• Planning plays a key role in supporting renewables
• Onerous planning regulations can present a considerable barrier:
• Regulatory and policy uncertainty
• Administrative hurdles
• Delays in approvals
• Complex multi-tiered regulation
• These barriers are present at all scales and in different ways
• Streamlining the planning process at all levels is essential for renewable energy projects.
Recommendation
Local government and planning authorities can take a more pragmatic and active
approach to land use planning, by avoiding unnecessary administrative steps and
implementing a clear objective for increasing renewable energy deployments.
7. Large-scale, centralised generation
• Large-scale renewables (LSR) could bring significant benefits to regional areas, where
energy generated could be used locally, and/or transmitted to larger population centres
• Main barrier is cost of augmentation of, and connection to, the transmission network
• No national standard for grid connection
• AEMC considered rule change that would provide a mechanism to allow for collaboration
and cost-sharing between generators wishing to build LSR in regional areas, but it didn’t
eventuate
• Under current rules, any party can request that AEMO undertake a study into the
feasibility of transmission augmentation in a particular area
• Such a study could encourage commercial negotiation between generators to jointly
construct new transmission infrastructure.
Recommendation
a local authority seeking to encourage investment in LSR in a regional area should request that
AEMO undertake a study to investigate options for the sharing of transmission augmentation costs
amongst interested generators.
8. Medium-scale distributed generators
(<30MW)Registration
• Registration process designed for large generators and is complex and time consuming
• No statutory timeframe for connection, and registration involves significant registration and participant fees
• Automatic right to connect exists for certain larger generators (>5 MW), and micro-generators (<10kW) also have an automatic right of
connection
• Other small to medium generators will only be guaranteed an automatic right to connection if a network business chooses to provide for
this
• These issues are currently the subject of a rule change proposal, discussed later in relation to precinct generation.
Connection aggregation
• AEMC recently approved rule change to provide for Small Generation Aggregators (SGA) in the NEM
• Companies can register as SGAs under the new rule, allowing them to supply electricity to the network by aggregating small generation
units (<30MW)
• SGAs can shield small generators from transaction costs and provide a wider range of possibilities in terms of return on investment
• Has the potential to engage distributed generation at times of peak demand, which in turn could lower network costs
• RDAs, with their local knowledge, are well positioned to provide some generic guidelines on this.
Recommendation
Local authorities can work together with SGAs and their communities to establish whether there is scope for an
area to benefit from aggregated connection
9. Precinct energy systems
• Generation units located in city buildings that generate sufficient electricity to meet that building’s energy needs/export excess to the
network
• Has primarily been gas-fired co- and tri-generation plants, but there is also scope for the development of systems using renewables
• E.g. Sydney CBD project could save up to $1.5 billion that has been set aside for new coal power plants and upgrades to the network
• Regulatory barriers are common to decentralised generation generally and a rule change process is currently underway which also has
ramifications for community renewables and small-scale generation
• National Electricity Rules deter generators from connecting to the electricity grid with its complex, poorly defined, and costly regulatory
processes for connection and export.
• Rule change proposal, which proposes the following:
• Automatic right of connection and standard access terms applicable to generators that meet ‘Automatic Access Standards’
• Improved connection process for embedded generators not eligible for automatic access
• Right to export electricity generated to the grid
• Changes would bring the regulatory framework for generation of between 10kW-30MW into line with the streamlined connection
arrangements for microgeneration (<10kW)
• If implemented, would greatly improve the regulatory framework and provide a more level playing field for decentralised generation.
Recommendation
RDA committees and local authorities should participate in the AEMC’s rule change process, ‘Connection of Embedded
Generators’, in order to ensure that the regional perspective is heard.
Local authorities with significant population centres could consider the suitability of a precinct generation scheme.
10. Community Renewable Energy (CRE)
projects
• Members of the local community invest in a small-scale generation project
• Increasingly popular as a model for renewable energy generation
• Thousands of CRE cooperative organisations and projects around the world, with 70 in the early stages of development in
Australia.
• There is currently only one project in operation in Australia: Hepburn wind in Victoria
• Numerous technical, regulatory, cultural and legal barriers:
• Uncertain timelines for connection enquiry and application
• Lack of clarity regarding the information required to achieve connection
• Onerous technical requirements imposed on CRE generators as a condition of connection.
• Costs and terms of connection.
• Precinct generation rule change theoretically encompasses CRE projects
• In other jurisdictions, CRE projects have received much stronger support. For example, the Scottish Government's Community and
Renewable Energy Scheme, designed to support CRE projects with funding and project management assistance, has assisted in the
commissioning of over 300 CRE projects.
Recommendation
As above, the ‘Connection of Embedded Generators’ rule change should be supported. Regional authorities
or state governments could institute a scheme to assist local communities to navigate the regulatory
process for CRE projects.
11. Options for retailing energy from distributed
generation
• Lack of clarity of the options for small-scale generators to retail the
energy they generate
• Range of possible options, including:
• establishing a retailer under the existing Rules
• selling electricity under a feed-in tariff
• subcontracting logistics (billing etc.) to a big retailer
• establishing a Power Purchase Agreement with a retailer
• setting up a virtual net metering (VNM)
• establishing a new tier of small retailers
• None of these approaches seems ideal at present, with significant
issues with each option.
12. Small-scale decentralised generation
Connection
• Small-scale decentralised generation, i.e. rooftop solar, does not face the same barriers as larger generation because of the
establishment of a separate and simpler connection negotiation framework for retail customers in the Rules
Feed-in tariffs (FiTs)
• Embedded generator is paid a premium for energy exported to the network
• Have been successful and cost-effective worldwide, but have been plagued by inconsistent policymaking: there is no federal FiT
• Currently little political drive to improve FiT policymaking
• Contrasts markedly to Germany, and other countries, where the FiT started high, but was ramped down in a predictable manner
over time as uptake increased
Remote/off-grid
• Fringe-of-grid locations are not considered a priority for network business due to the small customer base
• There is often resistance to supporting embedded generation in these areas
• Renewable energy can be used as a substitute to further investment in these networks, or as a supplement existing supply
• E.g. the Northern Territory Government aims to replace diesel generators in remote off-grid areas with renewables
Recommendation
Local government can partner with networks and industry to support for the
integration of renewables in rural electrification.
