Australia’s unique energy regulatory context – Part 1
May 5, 2020
Peter Brown

Australia has a uniquely ‘long, skinny’ energy network with a high penetration of renewable generation. Networks in comparable countries are very dense and interconnected, giving them a high level of protection against outages. However, Australia’s geography and dispersed population centers mean that the same levels of interconnection are not possible.

This presents several challenges for the market operator (AEMO) in ensuring security and stability of supply on one of the world’s largest energy networks. For this reason, renewable generation connected to the National Electricity Market (NEM) must meet a much higher compliance bar than is necessary for other countries.

Who is affected

PSC works with many generators, providing them with a range of technical advice. We are increasingly seeing issues around ongoing compliance obligations under the National Electricity Rules (NER).  Operators for whom energy generation is not a core part of their business, or those from jurisdictions that have a lower compliance requirement, may not be aware of the on-going compliance obligations that come along with owning a generation asset.

We’ve seen issues arising for a number of different types of owners and operators. They include:

  • Offshore or new investors who are not familiar with the regulatory landscape in Australia.
  • Investors buying turnkey facilities and not being aware of on-going obligations.
  • Original Equipment Manufacturers (OEMs) who are not familiar with the Australian NER, which are substantially different from other countries.

Australia’s governance structure

What is required

All generators are required to demonstrate compliance with their Generator Performance Standards (GPS), as well as meet the expectation of other areas of the NER. These include:

  • Providing accurate models
  • Planning
  • Review
  • Non-compliance reporting
  • Change control

These requirements don’t end with connection approvals. The Australian Energy Regulator (AER) requires that all generators have in place an active Compliance Monitoring Program. These Programs are intended to be living documents that are continually updated to reflect changes in plants and in the NER. In addition, operators/owners must carry out compliance reviews:

  • Every time any part of the plant is upgraded or altered, including software or firmware upgrades.
  • Each time the Australian Energy Market Commission (AEMC) issues a rule change or a new version of the AEMC template for generator compliance that requires your plan to be updated.

Generation owners/operators may also find themselves subject to audits by the AER, regardless of whether they have committed a breach, or are seen to be at fault. The audit may come in response to issues on the grid near their generation asset, requiring the AER to ensure nearby connections are compliant with their GPS.

This all adds up to a very high compliance burden that is often not apparent to owners when they invest in a generation asset in Australia.

Further information

In Part 2 of this blog, Peter Brown explores Compliance Monitoring Programs in further detail.

If you’re a new or recent entrant into Australia’s generation market, find out more about how we can help you with your compliance requirements.   If you’d like to make an appointment to understand how Compliance Monitoring might apply to you, please get in touch.