Australian electricity and gas markets – July 2024 Update 

In our July update, we take a look at the latest rule changes and market updates affecting participants in the Australian electricity and gas markets.

What you need to do

Stakeholders should note the market updates below, and note any impacts on their compliance obligations.

National Electricity Rules

On 25 July 2024, the Australian Energy Market Commission (AEMC) released its draft determination and more preferable draft rule on its Integrating price-responsive resources into the NEM rule change.

This draft rule proposes to allow Virtual Power Plants (VPPs) and other unscheduled price-responsive resources to compete with large-scale generators on the National Electricity Market (NEM) by:

• establishing a framework (dispatch mode) through which market participants can nominate an unscheduled price-responsive resource (e.g. VPPs, community batteries, etc) to be included in the Australian Energy Market Operator's (AEMO) central dispatch process;
• creating a short-term incentive scheme to encourage participation in dispatch mode; and
• mandating new monitoring and reporting obligations for the Australian Energy Regulator (AER) and AEMO in relation to unscheduled price-responsive resources.

Stakeholders are invited to submit feedback on this draft rule by 12 September 2024.

Dispatch mode

Electricity is purchased and sold on the NEM through AEMO. AEMO determines the spot price of electricity on the basis of dispatch bids submitted by Generators and Integrated Resource Providers (IRPs).

Unscheduled price-responsive resources have traditionally been excluded from AEMO's dispatch process. They are not appropriately considered when determining how much energy demand needs to be met, how to meet this demand or the price at which it is purchased. However, the proposed dispatch mode provides a mechanism through which market participants can submit bids on the basis of unscheduled price-responsive resources.

Dispatch mode applies exclusively to voluntarily scheduled resources (VSRs). A market participant can nominate a qualifying resource as a VSR with AEMO if the resource falls within the following classifications:

The IRP registration category was introduced in the Integrating energy storage systems into the NEM rule change in December 2021. The present draft rule builds on this rule change by further integrating IRPs within AEMO's dispatch process.

Participants that nominate a VSR retain their registration category (i.e. Generator, IRP, or Market Customer) but are also referred to as a voluntary scheduled resource provider (VSRP).

Multiple resources can be nominated under a single VSR if the resources are aggregated. There is no requirement for an individual resource within a VSR to fulfil a dispatch instruction provided that the VSR can fulfil the instruction in aggregate.

The AEMC is expecting the rule change in relation to dispatch mode to commence in November 2026.

Incentive Scheme

The draft rule proposes the following two incentives for VSRPs in addition to those currently available to participants in the dispatch process:

• exclusion from the reliability and emergency reserve trader cost recovery scheme in respect of VSRs; and
• time-limited incentive payments.

The AEMC's preferred position is for incentive payments to be provided through the Australian Renewable Energy Agency or a government scheme. If these options are not available, the AEMC is proposing a tender process with the following features:

• VSRPs submit bids to AEMO detailing their costs to participate in the central dispatch process; and
• AEMO awards incentive payments to the lowest cost tenderers subject to an overall incentive payment cap and a confidential price cap.

The AEMC is proposing an AU$50 million payment cap over a five-year incentive period.

The AEMC expects the first incentive tender will occur in early 2027.

Monitoring and Reporting

The draft rule proposes additional reporting and monitoring requirements for the AER and AEMO. These requirements are centred on monitoring and reporting the impacts of unscheduled price-responsive resources. The AEMC has scheduled these reporting guidelines to be published by December 2025.

Minor Changes

On 4 July 2024, the AEMC released its draft rule and consultation paper for its Minor changes 2 2024 rule change proposal. The proposal seeks to correct minor errors and make non-material changes to the National Electricity Rules (NER). Stakeholder submissions closed on 1 August 2024.

National Energy Retail Rules

On 4 July 2024, the AEMC released its draft rule and consultation paper for its Minor changes 2 2024 (Retail) rule change proposal. The proposal seeks to correct minor errors and make non-material changes to the National Energy Retail Rules (NERR). Stakeholder submissions closed on 1 August 2024.

National Gas Rules

On 4 July, the AEMC released its draft rule and consultation paper  for its Minor changes 2 2024 (Gas) rule change proposal. The proposal seeks to correct minor errors and make non-material changes to the National Gas Rules. Stakeholder submissions closed on 1 August 2024.

Other Updates

The AER is seeking feedback on its:

• Wholesale Market Monitoring and Reporting Draft Guideline and Explanatory Statement by 7 August 2024;
• 2024 Review of the NSW contribution determination guideline by 8 August 2024; and
• draft decision to amend the AER Expenditure Forecast Assessment Guidelines (Distribution and Transmission)  by 9 August 2024.

On 25 July 2024, the AEMC announced its Electricity pricing for a consumer-driven future review and released its draft terms of reference.

This review will look at ways to effectively integrate consumer energy resources such as household solar panels and batteries into the wider energy grid.

Stakeholders are invited to submit feedback on the draft terms of reference by 22 August 2024.

On 26 July 2024, the AER released:

• its final decision on its Compliance procedures and guidelines for retailers and distributors in jurisdictions that have adopted the National Energy Retail Law; and
• its annual compliance and enforcement report for 2023-2024, detailing some of the significant compliance and enforcement actions undertaken during the period which resulted in:
  • a total of $9.989 million in penalties from three court outcomes and five infringement notices;
  • four civil proceedings in progress in the Federal Court;
  • four enforceable undertakings accepted; and
  • eleven compliance bulletins (including consultations) and guidance notes published.

AEMO released its Quarterly Energy Dynamics Q2 2024 Report summarising developments in the Australian electricity and gas markets:

• East Coast:
  • increase in wholesale electricity prices following a period of low wind and rainfall;
  • increase in thermal coal generation following a period of low wind and hydro-electric generation; and
  • increased demand for Queensland gas supply in southern states following decreased gas production in Victoria.

• Western Australia:
  • increases in underlying electricity demand offset by increases in distributed photovoltaic generation;
  • energy prices remained relatively flat when compared to Q1 2024;
  • increase in total real-time market costs driven by increase in frequency co-optimised essential system services uplift costs; and
  • increases in local gas consumption offset by increases in local gas production.

On 19 July 2024, the Energy and Climate Change Ministerial Council released their:

• response to the Australian Energy Infrastructure Commissioner's (AEIC) Community Engagement Review;
• Home Energy Ratings Disclosure Framework – Version 1 as part of their Trajectory for Low Energy Buildings plan;
• National Guidelines for Community Engagement and Benefits for Electricity Transmission Projects; and
• National Consumer Energy Resources (CER) Roadmap.

On 1 August 2024, the Australian Financial Markets Association (AFMA) published a new AFMA gas addendum for use by market participants.

Authors: Dan Brown, Partner; Dale Gill, Partner; Paul Newman, Consultant; Carl Franzmann, Graduate and Ethan Low, Paralegal.