Insider 35: Why the Wholesale Demand Response Rule Change is Stuck and How to Unstick it

Since November 2018 the AEMC has been running a rule change process to deal with three proposals for, or relating to, a Wholesale Demand Response Mechanism.  Such attempts, or related attempts to constraint existing demand response to be more controllable and visible, are one of the great perennials of the NEM.  Even prior to the NEM, we grappled with the same issue during the Victorian reforms from 1993. The most recent attempt to deal with the demand side was in 2016 when Snowy Hydro proposed a rule change that would have required price responsive load to be scheduled.  That went nowhere; according to the AEMC it wasn’t worth doing.

The latest attempt appears to be far more serious but has hit a road block.  According to reports from the March 2019 AEMC workshop on the topic, no-one knows how to measure demand response satisfactorily.  Also, and while hardly recognised as a problem right now, there currently seems to be passive acceptance that any approach needs a middle man to work, so demand responses can be aggregated and scheduled.  Such an approach will throttle demand response, just when the NEM needs as much as it can get.

In this brief article, IES CEO, Hugh Bannister, suggests a way to expose willing retail customers to short term spot price volatility while keeping risk to a manageable level.  He also outlines what needs to be done to allow retail customers to bypass the middle man, while ensuring that the system is not destabilised by errant short term behaviour.

These concepts need to be fleshed out in more detail.  They should then be considered as possible “more preferable” options to achieve the goals of the current rule changes.

IES presented to the AEMC on these topics on 20 March 2019.  The presentation can be downloaded here.

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