Why electricity consumers hold all the power


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Published 20 December, 2016 by Kirsty Waterford

When the electricity grid was designed and built 70 years ago, no one could have predicted the important role households would play in supplying energy, and keeping the system stable.

Consumers can now earn money from the electricity market by selling clean renewable energy, and by keeping the grid stable. There has never been a better time to join the solar battery system revolution.

Australia is fortunate to have a reliable electricity supply. We can turn lights on, cook dinner or watch TV, with confidence.  Behind this high level of reliability is a complicated electrical engineering and finance system.

The system is designed to generate electricity at the same time as it is being used - a matching of supply and demand at all times. The grid is at risk of failing if this is ever mismatched. The system must also maintain stability of both voltage and frequency - a complicated process given the vast expanse of the network.

The Australian electricity system was built around large centralised power stations, or generators that produced electricity from coal, gas, and other fossil fuels. The generated electricity is delivered to consumers via poles and wires - the transmission and distribution network. When the system was first built, generators, poles, and wires were owned and operated largely by local governments and gradually amalgamated under State owned entities. Learn more about the history of Australia’s electricity system.

Large reforms occurred in the 1990s when a competitive market was introduced. The poles and wires, which are a natural monopoly, were split from generators and retailers. Generators and retailers were encouraged to compete in order to lower costs.  A central component of these reforms was the creation of the National Electricity Market (NEM) through which all trade between generators and retailers must pass. In the NEM, consumers are represented by retailers.

When the NEM was created, it divided the coordination of the electricity market into two:

  • the energy market - controls supply and demand by continuously adjusting the price for electricity in the wholesale market; and
  • the ancillary services market - encourages loads and generators to have some standby capacity available in case supply and demand do become unbalanced. When the stability of the system is in jeopardy, these generators or loads can contribute or consume small amounts of energy to keep things stable.

When the NEM was established generators provided both energy and stability services. Consumers were passive, using energy when needed. In the 1990s it was difficult to foresee that households would be able to provide energy or ancillary services. However, the designers of the NEM designed an elegant system that could accommodate this.

In recent years there has been rapid adoption of solar photovoltaic (PV) and we are now seeing a surge in electricity storage. Solar combined with battery systems and intelligent software such as Reposit’s GridCredits technology, mean consumers can now own personal power stations. These can sell energy and stability services to the National Electricity Market.

Photo Attribution 'Power' by Sylvain Naudin - CC