Australian Energy Market Commission to open up demand management for sale by new players in National Electricity Market

Electricity grid struggling to cope and prices soaring? Pay the big power users to turn off their machines and she’ll be right, the energy rule setter says.

Big energy users will earn money by switching off machinery when the electricity grid is struggling, under planned structural reform to the market.

Changes where new companies can buy and sell “demand” independently of those which sell “supply” should be introduced as soon as possible, rule-setting body the Australian Energy Market Commission says.

“Taking demand pressure off the power system is a substitute for generation and helps tackle rising wholesale prices at peak times, reducing electricity costs for everyone,” commission chairman John Pierce said.

“Technology is developing fast and changing the economics of the market. It won’t be long before digitalisation gets to the point where a truly two-sided market is possible.”

The draft changes published by the commission today are urgent because of the looming closures of coal-fired power plants.

The Liddell coal plant in NSW’s Hunter Valley will close by 2022.

From about 2028, there is likely to be a cascade of coal-fired plants closing in NSW, Queensland and Victoria, according to the Australian Energy Market Operator.

This will more than halve the capacity of coal in the national electricity market.

Energy and Emissions Reduction Minister Angus Taylor welcomed the proposed change, saying it would “complement our work in giving power back to consumers”.

“Consumers that work together will have improved negotiating power and will get a better deal,” he said.

Currently, retailers can make individual arrangements with big energy users to reduce demand.

“Right now, only retailers can offer this service,” Mr Pierce said.

Under the changes, a third party business will be able to aggregate withdrawal of demand by commercial and industrial consumers and sell that into the market.

If the price of withdrawal is cheaper than the price of cranking up more generation — if available — then that would be used by the market to keep prices lower overall.

However, retailers have warned of unintended consequences of higher prices by adding more players to the market.

The commission has opened up its proposed change for submissions until September 12.