Sydney, Australia --- (METERING.COM) --- September 7, 2012 - While there is some evidence of uptake of demand side participation in Australia’s national energy market (NEM) over recent years, the efficiency of the market can be improved by effective use of the demand side, according to a new draft report from the Australian Energy Market Commission (AEMC).

To facilitate this will require changes to every part of the electricity supply chain, with changes to some aspects of how the supply side of the electricity market operates and through greater empowerment of consumers.

The ‘Power of choice’ report is aimed to provide a package of integrated reforms to facilitate efficient demand side participation.

To make informed choices about the way they use electricity, consumers require information, education, incentives and technology, says the report. Network operators, retailers and other parties need incentives to maximize the potential of efficient demand side participation and respond to the consumers’ choices, in a manner that minimizes the total cost of electricity services.

Among the recommendations are that demand side participation should be rewarded in the wholesale market, and demand side participation actions separated from the sale and supply of electricity. Consumers’ ability to access consumption information should also be enhanced, and there should be a gradual phasing in of time varying network tariffs.

An overarching framework should also be established to encourage commercial investment in better metering and to promote consumer choice in how their meter can provide additional functions to provide demand side participation products.

Better metering – and particularly interval metering – can play a very important role in helping consumers understand their energy use, notes the report. Moreover it can help identify – or enlist the help of consumers’ retailer or third parties in identifying – actions they can take to reduce their energy costs.

New metering arrangements

According to a supplementary report on principles for metering arrangements in the NEM, the current arrangements are inhibiting the ability of consumers and market participants to invest in metering technology which supports demand side participation.

To overcome the barriers, two potential models are proposed:

  • Contestable rollout, where metering provision is open to competition among the energy market operator’s approved service providers. Consumers would have the right to either contract directly with an approved metering service provider, or where the consumer does not exercise that right, the retailer is responsible for the metering provision and services at the consumer’s premise. Under this model the consumer should be able to retain the same metering installation when changes retailer.
  • Monopoly rollout, where the local distribution network service provider would have exclusive ability to install and operate interval or smart meters, when requested by the consumer or retailer/third party provider. The local provider would be subject to performance standards and metering charges would be regulated by the regulator.

These are under debate within the industry as to which model would result in the efficient delivery of metering services for consumers. Questions regarding the contestable rollout relate to whether the additional functionalities to support smart grid operations will be captured and also whether the resulting investment in the supporting communication platform will be of sufficient quality. Regarding the monopoly rollout, the main issues relate to whether it will inhibit innovation, the performance of the local provider in providing metering services, and the efficiency of the network metering charges.

The contestable approach is the favored one, the report states. Meter provision does not have the characteristics of a monopoly service and it will drive innovation and metering services at efficient cost. A number of third parties have indicated their keenness to enter this market. However, irrespective of which model is applied, it is important that consumers have an effective choice in their metering technology and that the arrangements are simple and practical for them to exercise that choice.

The draft report is open for consultation until October 11. A final report will go the Standing Council on Energy and Resources (SCER) on November 16.