Stand-Alone Power Systems (SAPS)

What is a stand-alone power system?

SAPS – General overview

A SAPS is an electricity system that generates and distributes electricity and is not physically connected to the interconnected national electricity system. These systems provide electricity to customers via a local power system. A SAPS can come in various forms, but a common model is one or more renewable power generation units, a battery, and back-up generation (usually a diesel generator ). SAPS are often used in remote communities out of reach of existing power lines. The electricity is generated, stored and consumed within the SAPS itself, without relying on external sources. The distribution network is isolated and independent from a larger interconnected network.

Regulated SAPS

Regulated SAPS are standalone power systems that are operated by a Distribution Network Service Provider (DNSP) and declared by participating jurisdictions. Regulated SAPS may be offered to connections that are currently (or were previously) connected to the interconnected network. Typically, the process for moving to a SAPS occurs when the cost of transitioning to a SAPS is lower than the cost of maintaining the grid connection.

Section 6B of the National Electricity Law (NEL) allows for jurisdictional regulators to declare a microgrid to be a regulated SAPS operating under the new SAPS settlement frameworks only if that microgrid does not form part of the interconnected national electricity system. Stand-alone power systems that are not deemed to be Regulated SAPS are not considered to be part of the NEM and are not regulated under the NEL and National Energy Rules (NER).

Regulated SAPS, even though they are physically disconnected, are considered to form part of the NEM. Appendix C of the Australian Energy Market Commission ’s (AEMC’s) Review Of The Regulatory Frameworks For Stand-Alone Power Systems – Priority 1 provides a discussion of the changes to the underlying regulatory framework.

Under the regulatory framework for distributor-led SAPS, SAPS may be provided by DNSPs where they provide an efficient alternative to maintaining the traditional ‘poles and wires’ connection(s) to customer(s), while maintaining reliability and security of supply standards. It might be efficient to switch a property (or a number of properties) from grid-connected to a SAPS where, for example, the feed-in line connecting those properties to the grid is likely to have a high cost of maintenance or requires replacement. With increasingly lower costs of batteries and generation, it is sometimes cheaper to switch these properties to a SAPS than to maintain or replace existing connection infrastructure.

The cost savings arising from the use of lower cost SAPS flow through to all users of the distribution network, through lower network prices. Where it is practical and efficient to do so, DNSPs may adopt renewable generation resources to support energy supply for SAPS installations.

Regulated SAPS are required to support “NEM consistent” services, which means reliability and fault-repair standards must be as high as those for grid connected premises.

Regulated SAPS form part of the national electricity system to which the National Energy Laws and Rules apply. The Australian Energy Market Operator (AEMO) and the Australian Energy Regulator (AER) have various roles in administering regulated SAPS. If you are unsure of what regulatory requirements may apply to your project, please contact the EIT team to discuss this further.

Third-party SAPS

If a SAPS project is led by a third-party (that is, an entity other than the local DNSP), it does not meet the definition of a Regulated SAPS and therefore is not captured by the NEL and Rules. Third-party SAPS are currently the responsibility of jurisdictions. For more information please see the AEMC’s SAPS priority 2 report here.

Is a SAPS the same as a microgrid?

It depends on what context the term ‘microgrid ’ is used in.

There is no definition of a ‘microgrid’ in Australia’s NEL or NER. But a SAPS can likely be considered a type of microgrid as that term is commonly used.

As defined by the AEMC in their draft report on Consumer protections for off-grid customers, a microgrid may be defined as: 

Any system supplying multiple customers not physically connected to the grid. Includes anything from a large town to two farms connected to each other. Generation sources typically include solar PV , wind turbines and small-scale gas generators and diesel engines. Alternatively, microgrids are electricity networks that can be isolated and operated independently of the interconnected electricity system (or “grid”).

To learn more about microgrids, please see our hypothetical case study here.

The AEMC uses the term SAPS to encompass both non-grid connected sites with multiple customers and non-grid connected individual power systems (IPS), which relate only to single customers. There are no regulatory differences between these two kinds of SAPS.

Advantages of SAPS

As they have no connection to the network, SAPS are reliant upon their own energy generation resources. As noted in the AER Decision – Updating instruments for regulated stand-alone power systems, SAPS can have several benefits over a grid-connected system, including:

• Improving reliability to customers who were previously connected to the grid by relatively poorly-performing overhead lines and reducing the impact of environmental hazards.
• Lower network costs for all customers compared with the alternative of replacing and maintaining long stretches of overhead lines or providing expensive underground alternatives.
• Potentially being lower emission when SAPS use renewable generation.

Do I have a SAPS if I am ‘off-grid?’

Being off-grid is more complex than just having your own solar and energy storage solutions. It means you are not connected to the electricity network, do not have a retailer, DNSP or access to the usual NEM energy processes and protections.

If your property is not connected to the grid, then you are generally still not a SAPS, although the technology you use may be similar.

A regulated SAPS (sometimes called a distributor-led SAPS) is operated in a different manner whereby the DNSP is responsible for the assets, and customers supplied by the SAPS retain all their current consumer protections and existing reliability standards.

Regulated SAPS customers will have all the following:

• A meter.
• Consumer protections equivalent to customers connected to the grid.
• Choice of retailer.
• A DNSP that is responsible for the system.

How long has the SAPS framework been in place?

Historically, stand-alone power systems not connected to the NEM, generally in remote areas, have been exclusively subject to regulation by states and territories at the jurisdictional level.

Since 1 August 2022, electricity distribution businesses have been allowed to install permanent SAPS in the NEM. A SAPS is a Regulated SAPS when it forms part of the national electricity system. It is a part of a DNSP’s network and must be regulated in the same way as it otherwise would if it were part of the connected network.

What do I need to think about if I am considering a SAPS?

Relevant Rule - need and a viable solution

You must be able to demonstrate a clear need (a case for increased economic efficiency and/or reliability) and a proposal that will adequately supply all required energy reliably and affordably. Being grid-connected provides many benefits to customers, and there should be good reasons to remove customers from the main electricity grid.

The relevant legislation is called the National Electricity Amendment (Regulated stand-alone power systems) Rule 2022 and is available here. This sets out the considerations that must be met to transition to a SAPS.

AER expectations

The AER’s SAPS Expectation Letter sets the AER’s expectations of distributors on customer engagement prior to the installation of SAPS. 

If you are considering SAPS-related customer engagement, further information is available here. DNSPs must also develop and publish their own SAPS customer engagement document and review this document every 3 years.

Consumer protections

Following the relevant AEMC review, the relevant definitions in the NEL and NER are now updated to include regulated SAPS so that the price, reliability, and consumer protections (such as safety) that grid-connected customers benefit from will also apply to regulated SAPS customers.

SAPS customers will also retain access to the competitive retail market, including their existing retailers and retail offers. This means that customers will not be disadvantaged where a DNSP determines that it is more cost-effective to supply them via a SAPS.

The AEMC’s final report into the review of SAPS found that the existing energy-specific consumer protection framework, including national consumer protections in the NECF and jurisdictional consumer protections, are appropriate for, and should apply to DNSP-led SAPS.

Specific jurisdictional requirements

Some additional jurisdictional information is provided below:

NSW

• Regulations have now been made to implement the national framework for stand-alone power systems (SAPS) in NSW. The National Electricity (New South Wales) Amendment (Regulated Stand-Alone Power Systems ) Regulation 2022 (2022-711) (LW 25 November 2022) is available here.

Victoria

• In Victoria, the Energy Retail Code includes provisions which are equivalent to the NERL and NERR and so may also be applicable to SAPS (if the SAPS customers are supplied by a licenced retailer).

State and territory regulatory requirements may also apply (for example, licensing and exemption regimes, ringfencing provisions, technical and safety regulations) and if you are considering a third-party led SAPS, we encourage you to engage with the appropriate areas.

Where can I learn more?

The AER’s A Guide for SAPS Resource Providers provides an indication of how contractual arrangements and energy flows operate in a regulated SAPS as well as some other information.

Still have questions or considering a SAPS? Come and talk to us.