Electric Vehicle Charging
This hypothetical case study will be particularly relevant to charge point operators, charge point infrastructure providers, local governments, electric vehicle (EV) users, fleet operators, trade associations and other innovators looking for opportunities in this space.
Like any chargeable device, electric vehicles (including plug-in hybrid vehicles) require an EV charger to keep the battery full. The simplest and most common EV charging system delivers electricity to the vehicle by drawing electricity from an outlet connected to the grid.
Charging an EV at a user’s premises (that is, behind-the-meter) is likely to be the most common and convenient way to charge an EV most of the time.
There are several other charging models which present significant opportunities for innovation. These models may be differentiated by the location of EV charging infrastructure (‘EV charge points’) on-street, at destinations (for example, at a supermarket, carpark or workplace) and en-route (for example, a service station or dedicated charging points along a highway). They may also be differentiated by the method and model of payment (for example, mobile apps, credit cards or dedicated cards, as well as subscription services, pay-as-you-go services or bundled offers).
The regulation of the operation of EV charging infrastructure and the supply of energy using public charge points are captured under the national energy frameworks governed by the National Electricity Law (NEL) and National Electricity Rules (NER), and the National Energy Retail Law (NERL) and the National Energy Retail Rules (NERR). Given these frameworks are technology-neutral, electric vehicles are largely considered as another form of demand and another category of generation. The applicable national regulatory arrangements include those related to metering, connections to the network and sale of electricity to customers (among others). Where EV charging infrastructure is located at residential or business premises, and the EV charging service provider is supplying electricity to the occupier of the premises, the sale of electricity may be regulated by the NERL and NERR. However, the scope of the National Energy Customer Framework (NERL & NERR) is limited to the sale of energy (electricity & gas) to persons for premises. As a result, it is doubtful the sale of electricity from EV charging infrastructure located at a petrol station or shopping centre car park will be regulated by the NERL and NERR.
In addition to the national energy frameworks, jurisdictional regulatory requirements may also apply. Under some state and territory retail electricity licensing requirements, a licence or exemption is required for EV charging services (this is discussed in the section below on authorisation, licensing and registration requirements).
A network licence, authorisation or exemption for the operation of the EV charging infrastructure may also be required.
To help identify and unpack some of the key regulatory issues that an EV charging service provider may encounter when navigating the national, as well as relevant state or territory based, energy regulations, this case study will explore a scenario where the Proponent establishes an EV fleet charging service for businesses with a growing EV fleet. The service will be offered across the National Electricity Market (NEM) (i.e. NSW, Victoria, South Australia, Queensland, Tasmania and the ACT) and the Northern Territory.
For this scenario, the following information is provided:
- a high-level overview of a hypothetical project including the project goals, project facts and ownership and service delivery models
- relevant authorisation, registration and licence requirements applicable to the hypothetical business model
- key energy specific regulatory obligations applicable to the hypothetical business model, and
- potential challenges the hypothetical Proponent may need to navigate when developing this business model.
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- Currency: The Material is based on publicly available information as at the date of its preparation. The Material is current as at 3 December 2021.
- Scope: The Material only covers energy market regulatory obligations that are administered by the Australian Energy Regulator (AER), the Australian Energy Market Operator or the relevant state or territory energy regulator. It does not cover other obligations that may apply, such as safety obligations, general consumer law obligations or obligations under the financial services regulatory framework. It also does not cover associated technical matters such as compliance with Australian standards or connection requirements.
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Scenario: EV Fleet Charging Service
The number of EVs in Australia is expected to grow as cheaper models arrive and more EV charging infrastructure is rolled out. In addition, governments across the country are helping businesses bridge the cost of transitioning to EVs by offering incentives that support the purchase of EVs by fleet owners.
In this context, an innovative EV technology business (the Proponent) plans to offer a new EV fleet charging service to businesses seeking to take advantage of various government incentives to transition their existing vehicle fleets to EV fleets. The Proponent already offers a web-based analytics service to help businesses to better manage and track their business vehicles. Recognising the significant growth opportunity presented by electric vehicles in Australia, the Proponent intends to leverage its existing technology and platform to enable EV fleet owners to take advantage of the value that EVs can provide.
The Proponent intends to operate a fully integrated business model which, in addition to its traditional fleet management service, includes installation and operation of EV charge points at a business’ premise and the sale of electricity from the charge points to the fleet owner.
In the future as its customer base expands, the Proponent may also offer network support services to the local distribution business or offer wholesale demand response services or ancillary services in the National Electricity Market (NEM) wholesale market on behalf of the fleet owners to capture an additional revenue stream for the business. Those future potential services are not discussed in this case study.
By choosing to become both an EV charge point owner/operator and retailer of electricity, the Proponent will need to navigate various national and jurisdictional electricity registrations, authorisations and licenses, and comply with the energy specific obligations, that each of these entail.
The EV fleet charging service aims to:
- help fleet owners reduce the costs of operating their vehicles
- accelerate the uptake of EVs in Australia, and
- contribute to emissions reduction goals.
|EV Charging Service
|NEM and Northern Territory
|An innovative EV technology business
Ownership and operation model
The Proponent would own and operate the technology supporting the EV fleet management system and the EV charge points and associated infrastructure.
The Proponent will provide a fully integrated service to its customers (the fleet owners) which will include:
- web based fleet management service
- installation and operation of EV charge points on site at a business’ premises, and
- the sale of electricity from the charge point to the fleet owner, including metering, payment and billing services.
Overview of authorisation, registration and licensing requirements
The National Energy Retail Law (NERL) states that any person who sells energy ‘to a person for premises’ is required to have a retailer authorisation or hold an exemption. Where EV charging infrastructure is located at residential or business premises, and the retailer, exempt seller or EV charging service provider is supplying electricity to the occupier of the premises, the sale of electricity may be regulated by the NERL and National Energy Retail Rules (NERR).
The Proponent may therefore require a retail authorisation (or could apply for an exemption) where the EV charge points are located on a business’ premises and electricity is supplied to the occupier of that premises ie. the fleet operator.
Owning, operating or controlling an electricity distribution network requires registration from the Australian Energy Market Operator (AEMO) as a network service provider or an exemption from the Australian Energy Regulator (AER) under the National Electricity Law and National Electricity Rules. It is unlikely that this registration requirement will apply to the Proponent’s activities, as they will either be outside of the scope of this requirement or covered by an existing deemed exemption:
- The requirement for registration or exemption does not apply to an EV charge point that is directly connected to the local distribution network.1
- If the EV charge point is connected to an existing exempt network rather than the local distribution network, a deemed network exemption applies. This exemption covers ‘Electric vehicle charging stations within a private network (e.g. a privately owned charging station located in a public area, hotel, shopping centre, university, etc.)’.2
The Proponent would be required to register with the Australian Energy Market Operator (AEMO) as a Customer. It will be a Market Customer given it will purchase electricity from the electricity wholesale market for its customers.
As a Market Customer, the Proponent would be able to participate in the energy market on behalf of EV fleet owners, that is - buying and selling energy in the wholesale electricity market.
The Proponent intends to provide its service to EV fleet owners in the National Electricity Market (NEM) and the Northern Territory. This means that the Proponent may be subject to various jurisdictional licensing and exemption requirements related to the sale of energy, depending on the specific jurisdictional legislative definitions. Jurisdictional electricity licensing legislation is not limited to the sale of energy ‘to a person for premises’ in the same way as the National Energy Retail Law (NERL) and retail electricity licences or exemptions will be required in several states and territories.3
- In Victoria, a licence from the Essential Services Commission (ESC) is required for the sale or supply of electricity, and this requirement is likely to apply to EVs. Alternatively, an exemption can be granted by the Minister through an Order in Council.
- In the Northern Territory, a retail licence or exemption from the Utilities Commission of the Northern Territory is required for selling electricity. Exemptions can be granted by the Utilities Commission with the approval of the Minister. The relevant legal instruments do not expressly address EVs, but a retail licence or exemption may be required. The Utilities Commission is commencing a review of the licencing regime in 2022 that will consider the application of the licence regime to EVs, among other issues.
- In South Australia, a fixed term exemption from the requirement to hold a SA retail and distribution licence applies to operators of EV charging stations. This means that EV operators who do not already hold a licence will not need to obtain and maintain a licence from the Essential Services Commission of South Australia (ESCOSA). This exemption will remain in effect until 30 November 2023 (unless there is a need for ESCOSA or Minister to revoke the exemption on an earlier date).4
- In NSW, the ACT, Tasmania and Queensland, there are no applicable state retail electricity licensing obligations.
The Proponent will also need to consider whether installing and operating EV charge points may require it to obtain a network licence or exemption from the jurisdictional regulator in any of the states or territories where it operates. The Proponent should discuss this issue directly with the relevant jurisdictional regulators. Whether a licence or exemption may be needed is likely to depend on the circumstances. As noted above, in South Australia, ESCOSA has issued an exemption from the requirement for a distribution licence for operators of EV charging stations. In other states and territories, there are not currently any published guidance documents or existing exemptions that specifically apply to electric vehicle charging infrastructure, but several governments or regulators are currently undertaking reviews that may clarify this issue in future.
Description of key energy specific regulatory obligations
The table below sets out the key regulatory obligations that may be applicable to the Proponent as a result of the various registrations, authorisations and jurisdictional licenses that apply.
|Key regulatory obligations
Authorisations and exemptions
Retailer authorisation (or individual exemption) may be required
An authorised retailer must comply with the National Energy Retail Law and National Energy Retail Rules, as well as any relevant provisions of the National Electricity Law and National Electricity Rules, and jurisdictional energy legislation, before they start selling energy.
Authorised retailers have various obligations in respect of the sale and supply of electricity to small customers, relating to:
Network exemption (deemed) (applies if EV charge point is connected to an exempt network)
Exempt parties must comply with the relevant general requirements set out in the AER’s Network Exemption Guidelines. For Electric Vehicle charge points connected to an exempt network, this includes requirements relating to:
Registrations and exemptions
Registration as a Customer required
Registered Customers must comply with the relevant provisions in the National Electricity Law, National Electricity Rules and AEMO Procedures. The relevant provisions include those related to participation in the energy and ancillary service markets, network connections and metering.
Licences and exemptions
Victoria - Retail electricity licence may be required
Licence holders must comply with the requirements of the Electricity Industry Act, the terms of their licence and the relevant ESC Codes of Practice and Guidelines including the Energy Retail Code of Practice. Under the ESC Codes of Practice, licenced retailers have various obligations in relation to the sale of energy to customers, in particular where they sell energy to small customers, including in relation to customer contracts, billing disputes, payment difficulties, contents of bills, the provision of information to customers, marketing and dispute resolution.
South Australia – Retail electricity exemption applies (for sale of electricity to customers who are not connected to the NEM)
An exemption from the requirement for an electricity retail licence applies to EV charging operators in South Australia. Exemption holders must comply with the conditions of the exemption, which includes complying with all applicable laws, providing information to ESCOSA on request and maintaining adequate insurance.
Northern Territory – Retail electricity licence or exemption may be required
Licensed retailers must comply with the Electricity Reform Act, their licence terms and Codes and Guidelines made by the Utilities Commission including the Electricity Retail Supply Code and Electricity Industry Performance Code. The Electricity Retail Supply Code includes obligations related to customer transfers, metering, dispute resolution, life support, and coordination and billing between retailers, network providers and generators. Exemption holders must comply with the conditions of the exemption.
Network licences or exemptions may be required in some states or territories
An exemption from the requirement for a distribution licence applies to EV charging operators in South Australia and operators must comply with the exemption conditions, as discussed above. In other states and territories, the proponent should seek guidance from the relevant state or territory regulator in relation to whether a network licence or exemption may be needed and, if so, what conditions would apply.
Other energy specific regulatory obligations
In addition to the regulatory obligations that flow from the various registration, authorisation and jurisdictional licensing requirements, the Proponent will also need to be aware of other energy specific regulatory obligations related to the national and (relevant) jurisdictional energy frameworks. For example:
Connection of an EV charge point to a local distribution network will require a connection agreement between the charge point owner/operator and the local distribution business. These agreements set out the obligations of the distribution business in respect of the provision of customer connection services to the connection point. They also set out various obligations on the customer (in this case, the EV charge point owner/operator) including in relation to information provision and safety.
Decisions regarding the location and design of EV charging points must be undertaken having regard to relevant national and jurisdictional safety legislation and standards. These are likely to include standards regarding electrical safety, work health and safety, communications, wiring etc.
Potential challenges for this hypothetical proponent and their business model
The above discussion frames the breadth of regulatory considerations that the Proponent could face under this case study. This raises a range of challenges they may need to consider when developing their business model. While these challenges depend on the arrangements used to buy and sell electricity, some threshold questions the Proponent may need to consider are set out below.
The price that an EV charge point operator pays the local distributor can affect its ability to optimise and manage fleet load, including its ability to design simple and understandable EV customer incentives across the fleet and network. While the structure and level of network tariffs vary between different distribution networks, most are based on the customer’s maximum demand. For a fleet EV charging service, the maximum demand is likely to be very high when multiple vehicles are charging but very low at other times. In addition, most distributors’ standard network charges for large customers include lower prices at off-peak times. This presents opportunities for reward where EV fleets can be charged during off-peak periods. The distributor’s tariff structures and levels, including the time of day and form of its charges may need to be considered in the Proponent’s commercial analysis (e.g. customer pricing, customer demand).
In addition, while there is no regulatory mechanism for exemptions from network tariffs for EV charging, in limited circumstances the local distributor is:
- permitted to develop a bespoke tariff offering or ‘individually calculated tariff’ that is approved by the Australian Energy Regulator (AER) in its annual tariff proposal, and is
- able to implement trial tariffs (which some distributors are presently exploring for EV charging)5, which have a maximum period of up to 5 years before the distributor would need to seek AER approval.
Additional value may be gained by enabling EVs to participate in energy and services markets. For example, there may be opportunities to offer network support services to the local distribution business or offer wholesale demand response services or ancillary services in the National Electricity Market (NEM) wholesale market. However, opportunities to earn additional revenue are contingent on several factors, including the ability of the relevant party to integrate charging systems seamlessly with the grid eg. comply with relevant communication protocols, metering and response specification, cybersecurity requirements etc. Further, the extent to which additional revenue can be generated will depend on how vehicle users - and, in this case study, fleets more generally - interact with the grid eg. vehicle usage patterns need to be able to align with opportunities to earn revenue from Frequency Control Ancillary Services (FCAS).6
For a small innovative business seeking to enter the energy supply market, a multi-jurisdictional business model could prove challenging given the number of jurisdictional regulatory regimes that would need to be understood and ultimately complied with. Depending on the nature of the activities and services a Proponent wishes to provide, a model which utilises partnerships with other players may be one way to minimise the regulatory compliance risk and cost associated with National Electricity Market (NEM) wide participation. In this scenario, the Proponent as the charge point operator would be subject to the relevant jurisdictions’ regulatory regimes, including licensing regimes.
Enabling EVs to participate in energy and services markets provides their owners with additional revenue streams. Greater market participation and diversity lowers costs to all energy consumers by improving network utilisation through market signals and incentives.
Ongoing reforms and policy developments
1See the AER’s Electricity Network Service Provider – Registration Exemption Guideline, available at https://www.aer.gov.au/networks-pipelines/guidelines-schemes-models-reviews/network-service-provider-registration-exemption-guideline-march-2018.
2See the AER’s classes of network exemptions at https://www.aer.gov.au/networks-pipelines/network-exemptions/classes-of….
3If the Proponent also operates in Western Australia, a retail licence or exemption may be required from the Economic Regulation Authority. We have not addressed WA regulatory obligations in this case study as WA is outside of the scope of this website.
4A copy of these exemptions can be accessed at: https://www.escosa.sa.gov.au/projects-and-publications/projects/electri…
5For further information on trial tariffs see: https://www.aer.gov.au/networks-pipelines/network-tariff-reform/tariff-…
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