AER incentive scheme to drive potential $1bn in demand management action

Electricity consumers will have more choice and be able to get more value from technology that helps them manage their household electricity use under a new demand management incentive scheme released today.

The Australian Energy Regulator (AER) estimates that if electricity distributors fully subscribe to the new scheme, 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.

“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,” said AER board member Jim Cox.

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.

Along with this incentive scheme, the AER has improved its current research and development fund―the demand management innovation allowance. The improved allowance provides more funding, and will increase our focus on encouraging distribution businesses to share learnings across the industry and with consumers.

About the AER

The AER works to make all Australian energy consumers better off, now and in the future. 

We regulate electricity networks and covered gas pipelines, in all jurisdictions except Western Australia. We set the amount of revenue that network businesses can recover from customers for using these networks.

We enforce the laws for the National Electricity Market and spot gas markets in southern and eastern Australia. We monitor and report on the conduct of energy businesses and the effectiveness of competition.

We protect the interests of household and small business consumers by enforcing the Retail Law. Our retail energy market functions cover New South Wales, South Australia, Tasmania, the ACT and Queensland. We do not set the prices consumers pay.

We drive effective competition where it is feasible and provide effective regulation where it is not. We equip consumers to participate effectively, including through our Energy Made Easy website, and protect those who are unable to safeguard their own interests. We use our expertise to inform debate about Australia’s energy future.

Sector: 
Segment: 
Issued date: 
14 December 2017
AER reference: 
NR 42/17
Contact: 
AER Media 0466 409 921 media@aer.gov.au