Accelerating access, deployment and orchestration of distributed energy resources through the regulatory sandbox
What is policy-led sandboxing?
The Australian Energy Regulator
The Australian Energy Regulator (AER) regulates electricity networks and covered gas pipelines in all jurisdictions except Western Australia. The AER sets the amount of revenue that network businesses can recover from customers for using these networks. The AER also enforces the laws for the National Electricity Market (NEM) and spot gas markets in southern and eastern Australia, as well as monitoring and reporting on the conduct of market participants and the effectiveness of competition.
(AER) is calling for large-scale innovative trial ideas that test how the regulatory sandboxing
A Regulatory Sandboxing mechanism is a framework within which participants can test innovative concepts in the market under relaxed regulatory requirements at a smaller scale, on a time-limited basis and with appropriate safeguards in place. Regulatory Sandboxing mechanisms usually also offer enquiry services, which provide innovators with informal guidance on existing regulation. The Energy Innovation Toolkit is a Regulatory Sandboxing mechanism.
framework can:
accelerate understanding of the best models to overcome barriers to access, deployment and orchestration of customer energy resources (CER) and distributed energy resources (DER)
create incentives in a way that is both effective for, and protective of, consumer interests.
This approach builds on the existing Energy Innovation Toolkit and Innovation Enquiry Service
The Innovation Enquiry Service (IES) provides innovators with informal guidance on how their new technologies or business models can be delivered under current energy regulation. This includes what energy regulation and market entry requirements might apply to your project, options that exist to adapt your business idea to progress under current energy frameworks, what energy bodies you might need to contact, as well as what processes and applications you might need to undertake, and why. For more information about what the IES does and does not provide, please see our About page, and our IES process page.
functions which have been in operation since 2022. These functions will remain open and available to innovators.
It is delivered in conjunction with project partners
The Energy Innovation Toolkit’s Project Partners are the Australian Energy Regulator (AER), the Essential Services Commission (ESC), the Australian Energy Market Commission (AEMC), the Australian Energy Market Operator (AEMO), and the Australian Renewable Energy Agency (ARENA). For more information on Project Partner roles and responsibilities, please see our about page and our trials page.
at the Australian Energy Market Commission
The Australian Energy Market Commission (AEMC) is an independent statutory body that works for Australia's future productivity and living standards by contributing to a decarbonising, affordable and reliable energy system for consumers. The AEMC makes and amends the National Electricity Rules (NER), the National Gas Rules (NGR), and the National Energy Retail Rules (NERR), and manages the rule change process. The AEMC does this in accordance with the national energy objectives, the central focus of which is the long-term interests of consumers. They also provide market development advice to governments.
, Australian Energy Market Operator
The Australian Energy Market Operator (AEMO) manages electricity and gas systems and markets across Australia, helping to ensure Australians have access to affordable, secure and reliable energy. Ownership of AEMO was – and still is – shared between government and industry, with members representing federal and state governments, as well as generation and production, distribution, retail and resources businesses across Australia. AEMO has always operated on a user-pays cost-recovery basis, and it recovers all operating costs through fees paid by industry participants.
, the Australian Renewable Energy Agency
The Australian Renewable Energy Agency (ARENA) supports the global transition to net zero emissions by accelerating the pace of pre-commercial innovation, to the benefit of Australian consumers, businesses and workers. Since 2012, ARENA has supported 612 projects with $1.81 billion in grant funding, unlocking a total investment of almost $7.9 billion in Australia’s renewable energy industry. ARENA’s expertise, deep understanding of the renewable energy sector and willingness to fund innovative and ground-breaking projects mean it provides a pathway to commercialisation for many new technologies and businesses that would otherwise struggle to get off the ground or be potentially lost to overseas markets.
, and the Essential Services Commission
The Essential Services Commission (ESC) is an independent regulator that promotes the long-term interests of Victorian consumers with respect to the price, quality and reliability of essential services. In Victoria, the ESC has responsibility for licensing and licence exemptions in the electricity and gas markets. The ESC licenses various activities including electricity and gas retail and distribution, electricity transmission, and electricity generation. The ESC also makes and enforces customer protections and other rules predominately in the electricity and gas retail and distribution markets in Victoria, where the National Energy Retail Law (NERL) and the National Energy Retail Rules (NERR) don't apply.
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Under these functions, innovative approaches to solving problems with the energy framework can be tested. The AER can grant a time-limited trial waiver
The Regulatory Sandboxing trial waiver function allows the Australian Energy Regulator (AER) to grant a time limited trial waiver for eligible trial projects, exempting an innovator from having to comply with specified rules for a period of time to allow a trial to proceed. The Victorian Regulatory Sandboxing trial waiver function allows Essential Services Commission (ESC) to issue trial waivers providing time limited relief from Victorian energy frameworks. For more information, please see our trials page and the AER's Trial Projects Guidelines.
for eligible trial projects, exempting an innovator from having to comply with specified laws and rules for a period of time to allow a trial to proceed. A trial rule change
Regulatory Sandboxing legislation will provide the Australian Energy Market Commission (AEMC) with a new power to make temporary rule changes to allow trials to proceed. This could be used to temporarily amend existing rules or to temporarily introduce a new rule of limited application. In deciding whether to make a trial rule, the AEMC must take into account the list of principles established in the Regulatory Sandboxing innovative trial principles, and the requirements listed in the Regulatory Sandboxing eligibility requirements, to determine whether a proposed trial rule is genuinely innovative. For more information about the innovative trial principles and eligibility requirements as they apply under the Energy Rules to both trial rule changes and trial waiver requests, please see the Australian Energy Regulator's Trial Projects Guidelines.
process allows the AEMC to temporarily change existing rules or introduce a new rule to allow a trial to proceed. Through these trial processes, we can run temporary changes of regulatory framework, to enable ideas to be tested.
Buckets: areas of focus
The “buckets” below reflect high-level concepts that the EIT seeks to explore through trials. These buckets are designed to be broad, allowing innovators to propose ideas that support the objective of multiple buckets without being constrained by overly detailed requirements. These six buckets deliberately target different areas of the regulatory framework and established energy industry practices and are designed to enable some diametrically opposed approaches to be tested.
Trial Ideas
Detail
Network-led orchestration or coordination
Can, and should, Distribution Network
In relation to electricity, distribution networks are the low voltage poles and wires that take power from the transmission networks to homes and businesses across Australia.
Service Providers (DNSPs) enable access to, and deployment and orchestration of, DER/CER? • Test different models of DNSP-led CER access, deployment and orchestration. • Test price signals versus direct control to drive DNSP-led CER orchestration. • This could help test the benefits and risks of the relationships involved in this model, how value can be shared and what the consumer response is, including in terms of trust.
Network data visibility as an enabler
How can we better improve access to network data to facilitate the effective orchestration of targeted CER by non-network participants? • Use network data to deploy and orchestrate or coordinate CER. • Test different commercial models for CER orchestration. This could help test an entirely different set of relationships to the network-led bucket and would provide an important point of comparison. It would also test how value can be shared and the consumer response.
Flexible metering and EV charging
Can the metering regulations better accommodate CER and electric vehicle (EV) Charging? • Solutions that allow EV customers to pay one dedicated retailer remotely (rather than multiple charge point operators). • Other technical metering trials to lower the costs of installation and incentivise greater uptake. • This could help test how to target EVs and other sources of CER/load with potentially the greatest bang for buck in terms of impact because of their size or flexibility.
Social retailing
Can customers, local government and communities own or control their own energy service arrangements to deliver the cleanest, lowest cost energy system for the community? • Solar installation on all viable roof space, irrespective of the load behind the meter. • Efficient deployment of storage to smooth out generation, demand & network utilisation, including during periods of low solar generation. • Participation of generation, storage and flexible loads to be orchestrated to make best use of local generation and existing network capacity. • The usage of zero marginal cost solar electricity through increased electrification of heating, hot water, transportation and cooking. • Increased transparency of the state of the local network and the underlying price of electricity.
Tariff innovation
Alternative retail pricing models for managing network tariff signals. • Test retailer innovations to manage network tariff signals and how these could be aligned with network tariff design and processes. • Evaluate consumer responses to alternative pricing and billing models. • This could help test alternative tools of orchestration and the consumer response, including the impact on trust and social licence.
Virtual Power Plant
A virtual power plant (VPP) is collection of distributed power-generating units connected by a central software that makes up a larger power plant. VPPs can be made up of combined heat and power asset, renewable generation through wind and solar farms, as well as battery storage. The units are dispatched together through the VPP, but each individual asset can operate independently.
(VPP) aggregation incentives
Testing consumer appetite for different levels of control and different commercial models. • Test the use of price signals versus direct control to drive CER orchestration. • Assess consumer appetite for third-party direct control of CER. • This could help test the benefits and limitations of this type of service model, including what the consumer response is.
Further information is available here:
Policy-led Sandboxing_ accelerating access_ deployment and orchestration of distributed energy resources through the regulatory sandbox - 13 February 2025.pdf(pdf 350.86 KB)
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