The Australian Energy Regulator (AER) has released a new demand management scheme for electricity distribution networks.

The AER estimates that if electricity distributors fully subscribe to the Demand Management Incentive Scheme and the Innovation Allowance Mechanism, demand management investment of up to $1bn over five years may be realised.

Increased take up of demand management measures by electricity network businesses and consumers will lead to a reduction in the need for costly infrastructure spending and accordingly put downward pressure on prices, benefitting the whole community.

ER board member Jim Cox said, “Australians are concerned about their power bills and at the same time are investing more and more in technology to allow them to better manage their electricity use like rooftop solar, home batteries and tools that can monitor and control household appliances.

“This AER scheme allows consumers the choice to work with their electricity distributor to reduce their own usage at times of high demand, which not only lightens the load on the network, but also decreases the need for expensive investment in infrastructure.”

Consumers will be able to choose whether to engage in demand management schemes. Practical examples of demand management technology include Virtual Power Plants (VPPs) which can group together batteries from across customers’ homes, and schemes whereby consumers can agree with their distribution businesses to reduce the amount of energy used by appliances such as air-conditioners during periods of peak demand without noticing any reduction in comfort levels.

The AER has worked closely with experts, network businesses and consumers in shaping the scheme. Transmission and distribution network costs make up about half of all household power bills, and the AER is continually working to ensure that consumers pay no more than necessary for safe, secure and reliable power supply.

“Our stakeholders have helped us to shape this new incentive scheme. Network businesses are demonstrating genuine interest in better integrating demand-side solutions into their business practices. Consumer groups have supported electricity distribution businesses doing more,” Mr Cox said.

Energy Networks Australia CEO, Andrew Dillon, said these regulatory changes better incorporate demand management and innovation into the ‘toolkit’ networks can use to provide customers with reliable and affordable electricity.

“Demand management can play a crucial role in enabling networks to provide the best value solutions for their customers,” Mr Dillon said.

“New technologies can be used as an alternative to poles and wires to manage not only peak demand but also voltage and power quality issues as growing numbers of household solar and batteries connect to the grid.

“The Finkel Review highlighted an urgent need to ensure market rules and frameworks enable the introduction of emerging technologies and the ability to test them, and this is a welcome step in the right direction.

“Importantly, the new approach allows for collaboration across networks and smart technology providers, which will maximise the innovation delivered for consumers.”

The Innovation Allowance Mechanism provides a small increase in the amount of funding available to networks for research and development.

The funding is focused on demand management projects that have the potential to reduce long-term network costs.

Mr Dillon said networks also support the AER’s application for a fast-track rule change to allow the scheme and mechanism to apply now rather than waiting for the next regulatory period.

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