by Scott Davis, Policy Adviser WA, Australian Energy Council

The proliferation of distributed energy resources, such as rooftop solar, is continuing around Australia at a rapid case, and this is particularly the case in WA.

Here, Scott Davis from the Australian Energy Council considers the implications of increased distributed resources, particularly in the context of Western Australia’s “islanded” electricity market.

Scott Davis, Policy Adviser WA, Australian Energy Council

Distributed Energy Resources (DER), such as rooftop solar and batteries, have the potential to offer customers lower cost, reliable, efficient energy, and the possibility of energy independence. However, while there has been a growing focus on DER1 benefits, they also come with some challenges.

What are the customer implications? And what are customers looking for from the energy supply changes that are currently underway? Here we take a look and consider it from the perspective of changes underway in Western Australia’s wholesale electricity market.

The energy transformation

The Wholesale Electricity Market (WEM) operates in the
261,000 square km South West Interconnected System (SWIS) and provides around 18 million MWh of electricity to 1.1 million households and businesses annually.

The SWIS has an ‘islanded nature’ – it stands alone from the National Electricity Market (NEM) and therefore needs to be more secure and reliable than a power system with interconnections2.

Collectively, rooftop DER is the largest energy source in the SWIS, according to the Australian Energy Market Operator’s (AEMO) most recent Integrating Utility-Scale Renewables and DER in the SWIS report.

There is now over 1000MW of rooftop photovoltaic (PV) DER installed behind the meter in the distribution networks. AEMO estimates that installed rooftop DER will more than double by mid-2028 to 2400 MW3.

The take up of solar in WA has been accelerating and it now has three of the top ten postcodes nationally for the level of solar installations. Mandurah to Perth’s south is the postcode with the second highest number of solar installations nationally. And the size of the solar systems being installed on rooftops has progressively been getting bigger.

As noted by WA electricity retailer Synergy, in this evolving electricity system (figure 1), an affordable, reliable, and sustainable energy supply remains what customers want4. Customers want to keep it simple but they also expect increasingly greater choice and technology enablement.

However, there is uncertainty as to how simple DER will remain for customers – and it is concerning when proposed future DER models have a range of new players involved in the mix, with multiple parties developing and offering customers a new suite of products and services. These scenarios must not only consider added complexity for the customer, but also need to maintain customer protections.

The Australian Energy Market Operator (AEMO) says that the many different forms of DER, with new and varying business models, “can provide a range of grid, essential, emergency reserves, and network support services.

Unlocking these new value streams in addition to the consumers’ services must be supported by markets and competition to support the investment choices delivering the best value.”5

To provide equitable access to the benefits of DER, a strong holistic market design, backed by a strong regulatory framework, is imperative. A substantive framework is already in place with existing retailers that covers various consumer laws, privacy protections, and regulated contracts. And while tweaking this framework will no doubt be required, retailers are seemingly in a strong position to continue to provide customer protections when offering future DER services.

High DER future

The impact of a high DER future is already being felt in Horizon Power’s service area. The utility is “bringing the future forward” by accelerating the uptake of DER in the town of Onslow.

The pilot program aims to generate 50 per cent of the town’s electricity from renewable energy sources, by providing residents and businesses with access to low-cost solar and battery storage systems6.

Horizon Power has developed a framework where controllable DER is linked to centralised control and dispatch via a DER management system (DERMS), as outlined in Figure 2.

However the Onslow trial is looking beyond getting the technology architecture right. It is aiming to understand how customer engagement, incentive design (including the transaction framework for the services that customers are providing), as well as how contractual and regulatory frameworks support a new supply model.

From a technology perspective, all the pieces are there, but it is complex to get end-to-end commands from the control room to a customer device. There’s as many as nine different vendors involved in Horizon Power getting a command from end-to-end. So it will be important to consider open standards and protocols to ensure the necessary interoperability exists for reliable communications.

Potential challenges are becoming apparent to Horizon Power in relation to applying DERMS in markets such as the National Electricity Market (NEM) or WEM. For example, a command dispatched to a DER might be intended to achieve a certain outcome for the distribution operator, but that may run contrary to the objectives of the retailer.

It raises the question of how the customer’s individual investment is factored into an analysis of optimal customer outcomes. It is likely to take a lot of time and effort to get all of the fundamentals of DER orchestration in place for it to bring system wide and society wide benefits.

Understanding customer needs

While decisions about where and when to install DER and how to operate it are increasingly consequential, many electricity customers lack the information, time and control to efficiently direct investment in, and operation of DER.

As part of its annual retail competition review, the Australian Energy Market Commission (AEMC) polled 2000 respondents about a range of energy technologies such as solar, batteries, smart devices, and energy services. Initially the participants had trouble understanding energy services and their benefits.

The participants were shown an advertisement of a typical day of an average family, and how the family interacted with energy services. Afterwards, they showed increased interest in energy services, particularly in relation to what energy technology to purchase next, and services become the most valued offer.

EnergyOS is also focused on the theme of energy services. To really engage with the full suite of DER opportunities, the tech start-up believes that consumers must first become familiar with the new generation of services available.

They say that this requires a different way of thinking: services are fundamentally different from products, and therefore, require a different mindset.

Western Power is looking to further understand customers’ future energy needs through utilising energy scenarios – like the uptake of different technology, macroeconomic and demographic factors – and how these determine future energy requirements of customers. They are modelling 50 scenarios and 50 future grids to determine what would be the most efficient grid to serve the most likely future energy need.

From that, they pose the question of how to transition to that new grid. A lot of the modelling uses automated tools and systems, and it is currently a proof of concept that Western Power is looking to develop further.

It is clear that the benefits of DER need to flow across the value chain for retailers to sustainably offer a compelling value proposition to customers. To support this, reform is needed in relation to network tariffs and other pricing signals.

Such reform may even encourage further product development, with the possibility of energy products coming to mirror Telco products. So while the customer challenges of a high DER future are evident, there is also confidence that solutions can be developed.

1 Definition of DER: By ‘distributed’ we mean connected to consumers on the distribution network, and we imply small scale and a diversity of locations and technologies. ‘Energy’ refers to both the release and absorption of energy. ‘Resources’ means being put to a useful purpose. Some examples therefore could include inverter-based generation, batteries, controlled small loads and electric vehicles.

2 AEMO, Integrating Utility-Scale Renewables and DER in the SWIS, March 2019

3 AEMO, Integrating Utility-Scale Renewables and DER in the SWIS, March 20194 Synergy presentation, WA Electricity Reform: Have we got DER Covered? panel, 7 March 2019

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