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Distribution Market Model – Response to approach paper

Author

David Havyatt

Energy Consumers Australia welcomes the Australian Energy Market Commission’s (AEMC) Distribution Market Model project. In this response we make a number of high level observations on matters raised in the Approach Paper.

Our first observations turn to the opportunity presented by the project. In particular, we encourage the Commission to recognise the opportunity to provide strategic leadership by continuing work on this project beyond its initial report in mid?2017. The work will contribute to the promotion of the long term interests of consumers by focusing on the innovation necessary to achieve dynamic efficiency.

Because we see the opportunity for this project to introduce significant positive change the rest of our observations include suggestions that challenge the ‘conventional wisdom’ on which aspects of the current regulatory framework are built.

We then provide a number of observations on the scope of the project. In particular, we are not convinced that trading in the controllable generation and demand across the distribution network can be separated from the uncontrollable. We contemplate a possible framing that changes the overall conception of the market as one where distribution markets trade with the generators in the wholesale market rather than retailers.

We note that the work on the distribution market model cannot be divorced from the work on consumer protections and regulatory obligations in non-traditional service delivery.

We conclude with some general observations of the implications of distributed energy resources for distribution networks. The first of these is the ongoing need for the network for public use and optimization of Distributed Energy Resources (DER). The growing need and the two-way flow require a fundamental re-assessment of the approach to pricing for distribution network services including an improvement in the application of cost reflective pricing and the potential development of nodal pricing.

We conclude by directly responding to questions raised in the Approach Paper.