The Energy Security Board (ESB) embarked on a major review of energy regulations, starting in 2019, with the aim of setting out changes to the regulatory framework that would be needed for after 2025 as the power system evolves. We have been following this review closely. For Flow Power, this has been an important reform to be involved in. We have, and continue to be a market leader for working with C & I to connect them with market signals, integrating technology behind the meter and providing access to renewable energy. Our business model is one of many emerging innovative approaches that are taking advantage of improvements in technology and the falling costs of renewables. Not only has this helped our customers achieve their goals, it aligns with the goals of the ESB in supporting customers as we collectively move to a more decentralised, digitalised and decarbonised power system. We have been making submissions to the ESB throughout the review, and sat on some of the expert groups providing feedback.
The ESB’s options paper was published in April 2021. It canvassed a broad range of policy options for four workstreams (to which we’ve added a high-level explanation):
- Resource adequacy and generator retirements: maintaining a balance of supply and demand as coal-fired power stations retire and renewables, energy storage and demand flexibility enter the system.
- Essential system services: keeping the power system secure by maintaining the right levels of technical services – things like system strength, inertia, voltage and frequency).
- Integrating demand flexibility: looking for ways to support a growing role for distributed energy resources (like rooftop PV and energy storage) and demand flexibility in our regulatory and market frameworks.
- Transmission access reform: Looking at changing the way generators access the transmission network, including what they are required to pay.
We had three key messages in response to the ESB’s paper.
Firstly, we are glad to see the ESB progressing essential system services and continuing to integrate demand flexibility. As the generation mix changes, it will be important to have forward thinking frameworks in place to make sure we are keeping the power system within technical envelopes. Setting up competitive arrangements for these new services will encourage new technologies and new providers to participate. In addition, demand flexibility will have a fundamental role in helping maintain reliability and keep costs down in a transition to a renewable power system, and should continue to be supported.
On the other hand, we’ve asked the ESB to not make recommendations where they haven’t properly assessed an option. Our submission highlights a range of issues with potential expansions of the retailer reliability obligation that the ESB don’t appear to have considered or consulted on. Given the implications of these reforms, we think the ESB needs to set out the risks for consumers of adopting these proposals. While the ESB might think they will help with reliability, we think it will increase costs for consumers, undermine competition and delay the retirement of aging, unreliable generators.
Lastly, we think there has been an undervaluation of regulatory stability. There has been a constant emphasis on the importance of regulatory change to accompany shifts in technology and the generation mix. While regulatory change will be necessary, consistently proposing wholesale changes without a consensus on the problem being addressed makes it harder to smaller businesses to enter the market and to innovate. Clear rules and regulatory stability helps businesses decide how to innovate and grow, and provide customers with value.
If you’re interested in reading our submission, it is available here. Flow Power response – ESB April paper