Finally some reform in favour of a cleaner, greener grid

On the eve of the recent Easter holiday break, the Australian Energy Market Commission announced a major reform to the National Energy Market that will assist cleaner energy connect to the national electricity grid. While the reform may not have registered high on holiday makers’ agenda, it is a win for businesses, local councils and others seeking to find a cheaper and more efficient way to connect medium sized co/trigeneration plants and renewable energy to the electricity distribution grid.

Governments, businesses, industries, local councils and the clean energy sector have acknowledged for well over a decade that connection barriers have been major obstacles to these types of locally-generated energy. Australia’s National Energy Market began operations in 1998 and it is the world’s largest interconnected power system covering a distance of more than 5000km and meeting the demands of almost 19 million consumers. Any person or entity should theoretically be able to enter the market. In reality, however, there have been considerable barriers to the deployment of co/trigeneration technology and other types of embedded generation trying to connect to the grid.

These barriers made the connection process uncertain, complex, time consuming, inefficient and costly. In particular, an embedded energy proponent is required by the National Electricity Rules to reach an agreement with the electricity distribution company that operates the poles and wires to the building. The multiple distribution companies across Australia follow different connection processes and have little incentive to facilitate connections. As a result, the connection process could take up to three years or longer, effectively crippling a commercial project.

In 2011, a partnership between ClimateWorks, the Property Council of Australia and Seed Advisory began work to address these barriers and facilitate the greater deployment of co/trigeneration and other technologies. The Unlocking Barriers to Cogeneration Project established a working group including customers, market participants, regulators, operators and policymakers to identify barriers and find practical and implementable solutions. A series of workshops with business and industry helped develop the solutions and identified ‘live’ commercial projects as case studies.

The result was a proposed set of improvements to the connection process for all embedded energy systems through features such as fixed timeframes and information being provided upfront. With pro-bono legal help from Maddocks Lawyers, the proposed solution was converted to a formal rule change request and submitted to the AEMC in April 2012. It became the first successful rule change proposal from ‘customers’ of the energy market. After three rounds of public consultation by the AEMC and submissions from over 44 organisations, the rule change was finally approved on April 17 – two years after the formal process for change began.

In announcing the reform, AEMC chairman John Pierce said the new rules balanced the need to maintain system security with a more defined connection process to help deliver more efficient investment and cost-effective outcomes.

From October 1, it will be cheaper and faster to connect co-generation, tri-generation and renewable energy to the electricity distribution grid. The new rule will apply to medium to large systems (over 5 megawatts) in NSW, South Australia, Victoria, Queensland and Tasmania. Until Queensland and Victoria move to the National Electricity Customer Framework, small embedded energy systems can also apply for connection under this process.

The new rule offers a revamped connection process that provides customers with a clear map of the new connection process, timed connection stages instead of an open-ended process, and specific time periods for electricity network companies to consult third parties during the application stage.

The reforms also provide more critical information to customers that will cut ‘green tape’ and allow applicants to produce early feasibility assessments with little expense. Electricity network companies will now be required to provide location specific network information that will help applicants find out very early where the potential ‘no go’ zones are and provide examples of what has already been approved.

Customers have also been granted greater rights, more time and flexibility to accept offers from electricity network companies and a clearer dispute resolution process if parties cannot agree.

The significance of these reforms goes well beyond those directly interested in connecting cleaner energy systems to the national electricity grid. ClimateWorks identified the property industry can deliver about one-fifth of the Federal Government’s 2020 carbon reduction target in a low cost way. This rule change to the national electricity market may have escaped the notice of most Australians but represents an important step in unblocking barriers to reducing Australia’s greenhouse gas emissions and building a cleaner low carbon future.

Anna Skarbek is executive director at ClimateWorks. Patricia Boyce is a director of Seed Advisory. Mendo Kundevski is an adviser to The Property Council of Australia.