CER Integration – A “Wicked Problem”

The Australian electricity system is expected to rely heavily on CER in future, with the Australian Energy Market Operator (AEMO) 2024 Integrated System Plan (ISP) forecasting that “coordinated CER” will become the largest form of dispatchable capacity in the NEM before 2050.

Whilst high uptake of CER in Australia is causing challenges for distribution utilities, Energy Networks Australia estimates that well-managed CER can save the electricity system AUD 7 billion per year by 2030.

Managing large-scale participation of CER is a “wicked problem” that requires an unusual collaboration across technology, economics, policy, and social science. The Australian National Electricity market (NEM) has a particular challenge due to the number of independent jurisdictions involved and the mix of public and privately-owned utilities.

CER has been a focus area for more than a decade in Australia and multiple government and industry bodies have produced plans and roadmaps. However, there’s no clear consensus on the best way to achieve increased CER participation and coordination.

This has led to various CER-related projects and pilots/trials, such as ProjectEDGE, Project Converge and Project Edith, that have been undertaken in parallel with limited coordination or links to specific CER roadmap actions.

The goals and design of these pilot/trial designs are influenced by each participating organisation’s key drivers and perceived risks from CER integration.

An analysis of these recent CER pilots and trials indicates the following key points:

• Technical solutions for managing CER within distribution system constraints are generally available through implementation of dynamic operating envelopes (DOEs) and common protocols (e.g. CSIP-AUS)
• All of the major NEM CER pilots and trials are based on hybrid architecture and have some structural issues that are likely to increase as CER participation increases, such as tier bypassing (where dispatch of CER bypasses DNSPs) and potentially competing wholesale and local network price signals
• Market and tariff design leads directly to trade-offs in risk allocation and performance against desired system qualities (system security, cost, etc.).
• Pilots and trials have experimented with various forms of network tariffs but they generally rely on relatively complicated bidding processes and CER control through Virtual Power Plants (VPPs) or aggregators. However, consumers are reluctant to give up control of their CER assets which may limit the uptake of VPPs.

In the long term, the size of the grid and the complexity of utilities and jurisdictions in the NEM is more suited to a decentralised, layered architecture.

As CER is forecast to become a key source of generation and storage, consumers should collectively have increased influence in the electricity system, and future trials will benefit from:

1. Better integration of consumer preferences (including Independence, Transparency, and Value); and

2. A range of tariff options to cater for consumer differences in CER knowledge and risk tolerance.

Overall, CER integration will require significant culture change, both by a) consumers that need to understand the role of CER and their impact within the broader electricity system, and b) utilities and market bodies becoming more aware of consumer preferences and how to better harness CER through a deeper understanding of these preferences.