Wholesale Demand Response Mechanism – 2025 AEMC Review – Draft report findings and overview

What is the WDRM?

Put simply, the WDRM is a way for electricity users to help balance the power grid by using less electricity when prices are high. The WDRM lets big users reduce their usage and get paid for it. The idea behind the WDRM is that demand response can help lower prices and keep the grid stable during peak times, which benefits everyone.

The WDRM is a relatively recent addition to the NEM and commenced operation on 24 October 2021. It enables demand response service providers (DRSPs) to offer demand response into the NEM, where it can be dispatched in the same way as generators. 

The WDRM is the only market mechanism in the NEM wholesale market that facilitates demand response, that is, payment for reducing load. 

Why is the AEMC reviewing the WDRM?

The AEMC is required to review the WDRM regularly under the National Electricity Rules .

What has the AEMC’s draft report recommended?

On 10 July 2025, the AEMC released a draft report on the role and performance of the WDRM. In summary, the AEMC has made two draft recommendations: (1) that the WDRM should continue operating; and (2) that the Expanding eligibility under the WDRM rule change request from 2022 be initiated.

This 2022 rule change request from Enel X Australia Pty Ltd could improve or increase participation in the WDRM. Since the AEMC recommends proceeding with assessing the merits of this rule change proposal, this means that in future, sites with multiple connection points may be able to participate in the WDRM. The AEMC notes that new participation in the WDRM could be unlocked through such an expansion for sites which may have multiple connection points, such as data centres and commercial and industrial sites.

What are some other findings?

The AEMC acknowledges that if the WDRM were phased out, existing WDRM resources would be unlikely to participate in the NEM through alternative mechanisms.

The AEMC reports that the recent Integrating price-responsive resources into the NEM (IPRR) and Unlocking CER benefits through flexible trading (CER benefits) final rules will help with strengthening demand-side participation in the NEM. These rule changes are both due to be fully implemented by mid-2027.

The recent IPRR rule change introduces dispatch mode due to commence in 2027. The AEMC considers that both dispatch mode and WDRM are key to facilitating broad demand-side participation. 

AEMC analysis estimates that the WDRM has resulted in $4.7 million in benefits to date, demonstrating that the benefits of the WDRM outweigh the annual operational costs of $350,000 - $500,000.

What has the AEMC noted will not be changing in its draft report?

Two-way demand response would involve consumers consuming more electricity during negative prices, helping to mitigate minimum system load events. As noted in the draft report, the AEMC does not consider that the WDRM should be expanded to include two-way demand response, as it does not appear to be compatible with the WDRM. This is due to the limited instances of sufficiently negative prices to incentivise increases in customer consumption, limiting its effectiveness.

The AEMC also considered that the WDRM should not be expanded to portfolio-level baselines, given its potential implementation complexity and costs. 

The AEMC also opted not to recommend expanding the WDRM to small customers as it considered that small customers’ participation in the wholesale market is best facilitated through the recent IPRR and CER benefits rule changes.

Moving forward:

The AEMC notes that while the WDRM has had limited participation to date, participation may still grow over time and provide greater benefits.

Should the draft recommendations be made final, the AEMC will seek to initiate the Expanding eligibility under the WDRM rule change in 2026.

Submissions on the AEMC's draft report are due to the AEMC by Thursday 14 August 2025, with the final report due for release by 23 October 2025.

The full report is available here: https://www.aemc.gov.au/market-reviews-advice/review-wholesale-demand-response-mechanism

Lastly, the AEMC notes the ongoing NEM Review (Nelson Review) could impact the WDRM final report and AEMC recommendations.

Notes:

The CER benefits final rule enables energy service providers for small and large customers will be able to separate and manage ‘flexible’ CER from ‘passive’ loads by establishing secondary settlement points in the energy market. Market participants will also be able to use in-built measurement capability in technology such as electric vehicle chargers and household batteries.

IPRR introduced a framework named ‘dispatch mode’ that allows currently unscheduled price responsive resources to be scheduled and dispatchable in the NEM, in aggregations or individually. It allows virtual power plants (VPP), community batteries, flexible large loads and other price-responsive small resources to compete with large-scale generators and storage in the wholesale market.