The Energy Innovation Toolkit has already helped many energy innovators to receive targeted guidance as to what is possible for their idea under current energy regulations. The guidance we provide these innovators is private to them insofar as it relates to their private IP, technical specifications and innovative technologies, but an important part of the Energy Innovation Toolkit is knowledge sharing. This case study is a summary of guidance we recently provided in response to Essential Energy – a distribution network service provider – and project proponents from the NSW town of Cobargo about a new kind of microgrid which will provide relief to residents of Cobargo and beyond and improve network stability in certain natural disasters.

Cobargo, a remote town in the south-east of New South Wales (NSW) experienced an extended power outage after the 2019/20 bushfires burnt electrical infrastructure across the region. Without power, the town’s water supply, sewerage and petrol pumps were not operational. No battery backup for telephone and internet services (including banking/EFTPOS) meant these services were also quickly unavailable and many homes and businesses were affected by the power outages for months.

As a result of this experience, Cobargo and District Energy Transition (CaDET) hopes to build an electricity microgrid that allows a portion of the town to continue to operate, using locally stored and generated electricity (island mode), when the network connection to the interconnected system (‘the grid’) is offline.

CaDET engaged ITP Renewables, a renewable energy consulting group, to undertake a microgrid feasibility study. ITP Renewables, who received a grant from the Australian Government’s Regional and Remote Communities Reliability Fund, worked with CaDET to prepare options for developing a local microgrid. Essential Energy, who supply power as the Distribution Network Service Provider (DNSP) for Cobargo, were also engaged to assist in identifying network requirements and interpreting the regulatory framework requirements.

The microgrid in this hypothetical scenario is intended to operate in “island mode” only when the network connection is offline and would otherwise remain connected to the grid.

The guidance we gave is intended to provide an indicative explanation at a staff level of the current regulatory framework and provides the starting considerations for any potential islandable microgrid trial to consider. Each situation is different and how it will be regulated depends on how the individual microgrid is implemented and operated. It is worth noting also that the below guidance does not consider the role of and impact on other entities such as retailers, and this will need to be addressed at a future stage.

Regulatory guidance being sought - what is an "islandable microgrid"?

There is no definition of a ‘microgrid’ in the National Electricity Law (NEL) or National Electricity Rules (NER) or state and territory energy laws. As such, the term is often used by different parties to refer to different things, including isolated standalone power systems (SAPS), embedded networks with distributed energy resources (DER) and standard connections with DER. In the context of this article, we will use the term ‘islandable microgrid’ to refer to electricity networks that can be isolated and operated independently of the interconnected electricity system (the ‘grid’) but retain connection with the grid and interface with the wholesale electricity market. An islandable microgrid differs from a SAPS in that a SAPS does not have any physical connection to the grid.

The proponents sought regulatory guidance as to how an islandable microgrid (which is at times connected to the grid, and at other times not) fits within current national regulatory frameworks. The questions to the EIT raised potential gaps in the existing national energy laws and regulations (collectively, the Energy Rules). Our response considered whether these gaps exist and if they do, what methods might be available to resolve these in order to implement an islandable microgrid.

What is possible now? What might need to change?

As the proposed microgrid is considered to form part of the interconnected national electricity system, generation assets and load connected to the microgrid would be treated as connected to the national grid for periods when the microgrid is connected to the National Energy Market (NEM) and periods when the microgrid is islanded.

In approaching the EIT, the proponents identified a number of potential issues which would have to be considered for any trial of an islandable microgrid to take place. These included:

1. Settlement anomalies - when a microgrid is islanded it is disconnected from the main grid, but electricity is still being provided to on-market meters; this will result in settlement anomalies.
2. Tariffs - network tariffs which work for the main grid or for SAPS won't necessarily be appropriate here, so it was possible new tariffs would need to be considered.
3. Privately owned assets – responsibility for maintaining privately owned assets such as rooftop solar PV connected to the microgrid.
4. Reliability of supply – responsibility for sufficient generation and storage, and reliability standards during islanding, including questions concerning DNSP-owned generation assets.
5. System operation – responsibility for operation of the microgrid during islanding, protection and performance requirements.

Detailed consideration of these issue is set out below, but the guidance provided by the EIT was that none of the considerations above presented insurmountable issues which would prevent the implementation of islandable microgrid technology. A detailed and technical proposal would need to be developed before an assessment could be made on whether a physical trial would be able to be accommodated within the Energy Rules, or whether the initiative should progress in the direction of a trial or rule change request.

Service Delivery Considerations

System operations, responsibility, reliability and ownership considerations

Next steps - what needs to happen now

The proponents have met with the EIT and its project partners to discuss the accommodation of islandable microgrids under the current regulatory framework. Through the work undertaken by the EIT and its project partners we have identified some of the next steps for the proponents. This includes creating more detailed operational and technical plans for the microgrid, and we will continue to work with them as they progress their project – whether that be towards a desktop trial, a formal sandboxing trial through the EIT or making a formal rule change request.  

As part of the guidance we gave to the proponents, we included what additional information and or clarification we would require from any proponent of an islandable microgrids trial in order to consider the matter further. This information includes:

1. the technical mechanism to be deployed to island and to reconnect to the interconnected system;

2. roles and responsibilities related to the islanding and reconnection of the microgrid;

3. the desired outcomes when islanded to affected market participants and customers.

4. how the interconnected system might technically operate;

5. the implications for NEM metering operations (in particular for metering data providers);

6. the potential implications for retail market processes, such as:

   • prudential management;

   • customer switching;

   • application of the National Energy Retail Rules (including provisions such as life support/medically dependent customer connections); and

   • Retailer of Last Resort processes.

7. further consideration of the operation of the retail market would also be required, including:

   • consideration of visibility to all affected participants of the potential for islanding;

   • notification upon islanding and upon re-establishment of network connection;

   • metering arrangements, including operation, installation, and maintenance; and

   • management of connection point standing data.