Keeping ahead of the energy transition

The story of Australian electricity is one of thousands of kilometres of poles and wires, threading through landscapes from deserts to oceans, and the outback to the city.

But as Australia heads towards the target of net-zero emissions by 2050, energy is no longer just about poles and wires.

The Australian Energy Update 2022, released by the federal government in September, showed 29 percent of the country’s total energy came from renewable generation in 2021-22. Renewable production increased by 10 percent, largely due to the “rapid expansion” of solar and wind power.

So how do our regulatory bodies stay ahead of this swiftly changing market?

The Australian Energy Regulator (AER) interim chief executive officer Kathie Standen says the key to meeting the challenge is to support innovation.

“The traditional ways in which the market and system worked for consumers has completely changed and that’s been driven by consumers themselves,” Standen says.

“Consumers are taking back control of their electricity, whether or not it’s the production of electricity or whether it’s their consumption. We now need to look at ways in which we can innovate and support consumers to be able to do what they want to do.”

The AER is the regulatory body for electricity networks and covered gas pipelines across the country, with the exception of Western Australia. The authority enforces the laws for the National Electricity Market and a number of spot gas markets.

It’s the AER that sets how much revenue network businesses can make from customers for using the networks, and that keeps an eye on the conduct of market players.

It lists its key role as ensuring energy consumers are “better off, now and in the future”.

Previously in COSMOS: What is the grid?

Some of the biggest market change is being seen in regional Australia, where the historic pole-and-wire delivery is most challenging. This, Standen says, is one of the reasons support for innovation is important.

“For example, in regional Queensland, we talk about the ways in which electricity is traditionally being delivered to customers,” she says.

“SWER [single wire transmission line] lines…. these massive big long lines that could be hundreds of kilometres long – are not necessarily always efficient and it’s not always good for consumers either, because if we get a flood through and that knocks down the electricity wire, then you don’t get electricity for a period of time. 

“Things like standalone power systems [SAPs] are coming into place where, in particular, regional consumers will build these new standalone power systems whether they’re wind generation, or solar, or whatever else they might want to do.

Read more: Renewables powering regional towns

“How do we then help facilitate this so that they still have the consumer protections in place? How do we also ensure that should their own systems go down, they can still access the services that they need to?”

Standen says one of the solutions the AER has implemented, where networks can have a lead role, is the updated electricity distribution ring-fencing guideline, released in November last year.

The guideline is aimed at easing the way for two key emerging markets – batteries, including community-scale batteries, and regulated stand-alone power systems.

“The way that the system works now is that you have the energy networks who build and use all of the power wires. They have a monopoly over the system because they have the monopoly over poles and wires,” Standen says.

The AER says ring-fencing has been implemented to separate the monopoly network services from other energy services to create a level playing field.

“Community batteries are on the rise as regional towns and local government areas seek to power their communities from renewable energy,” AER chair Clare Savage said at the launch of the guidelines last year.

“Our role is to ensure consumers are better off in this transition.

“The battery market is relatively new, and all providers should have the confidence and certainty that they can compete on a level playing field to offer energy services. Without changes to our ring-fencing guideline, network businesses may unfairly compete in this market, which could damage it in its early formation.”

Energy transition

The guideline includes a streamlined waiver process for eligible projects that speed up the introduction of community batteries to the market. They also support network businesses to move customers from a grid connection to a stand-alone power system where it is cheaper and more reliable.

‘SAPS are fast becoming a cheaper option than waiting for the replacement of old distribution lines,” Savage said.

In among the challenges of keeping ahead of the transition curve is the science factor. New technologies are emerging all the time.

So how do you consistently regulate an industry where the technology could change tomorrow?

“The challenge is that you don’t want to do it specifically for a generation type,” Standen says. “You don’t want to do something that’s designed just for solar or you don’t want to do something that’s just designed for wind.

“You want to be able to design something that will work for a generation that we haven’t even thought of at a particular location. So it has to be able to be able to deal with anything that’s coming down the path.

“There’s not many other places in the world that are looking at new systems.

“In a place like Queensland, where the majority of people don’t live in South-East Queensland, there’s an incentive to be able to come up with new solutions, whereas in other countries it’s not the same experience.

“We have to adapt, and we have to see what’s actually happening to ensure that what we’re doing is facilitating innovation, rather than hindering innovation. It’s about talking to consumers. It’s always about seeing what’s over the fence.”

The AER is in the process of introducing regulatory sandboxing. Standen says the intention is to ease the way for energy innovators.

“Someone who has a really interesting and different idea can apply to be in the sandbox, which will then allow them to not be subject to the existing regulatory controls that we might have – so it might mean that they don’t have to do a particular impact test, or it might mean that they don’t necessarily have to pursue certain functions or approvals,” Standen says.

“If you’ve come up with something new, and the system that we have in place doesn’t help you deliver on it, you can apply to come into our regulatory sandbox as long as you’re doing things like ensuring that consumers aren’t worse off and meeting specific criteria that we’re currently developing.

“We would look at it and be able to go, actually that’s a really great candidate for sandboxing – how can we help facilitate that innovation happening?”

The AER already has a toolkit and website to assist innovators with navigating existing regulations.

To add to the hurricane of change within the energy industry, many consumers are now feeding back into the grid, leading to the new term of “pro-sumers”.

Together with changing technology, this is part, Standen says, of consumers taking more control. In particular, regional consumers.

“I think it empowers regional communities to be able to take back a bit more control themselves over what they want to produce and when and how they want to use it,” she says.

“Hopefully, we’re responding to those types of challenges and those opportunities positively. We’re not perfect, but it’s a step in the right direction that can empower regional consumers to be able to use and produce electricity completely different from what they have done in the past.”