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Insights and News /

08 October 2020

Cost Benefit Assessment of Australia's future Distribution System Operator (DSO) frameworks

Peter Sherry

Peter Sherry
Partner | Energy, utilities and resources | Sydney

On 8 October 2020, Australia’s energy market operator (AEMO) and peak energy networks group (ENA) published our cost benefit assessment (CBA) on the different future Distribution System Operator (DSO) frameworks explored through the Open Energy Networks (OpEN) project.

The full report can be found below or on the AEMO website here and the ENA website here. We will discuss the findings in a webinar in November 2020. You can register your interest by emailing Oliver Morgan Williams.

As part of a wider set of Australian energy reforms co-ordinated by the Energy Security Board (ESB), the OpEN project was set up in June 2018 as a joint AEMO and ENA initiative, seeking stakeholder consultation and input on the best way to integrate Distributed Energy Resources (DER) into the grid. The project developed four high level frameworks to illustrate different market design options that might support the effective integration of DER. These frameworks were:

  • Single Integrated Platform (SIP): The single platform model envisages a unitary point of entry to the entirety via AEMO as the market operator, effectively an extension of the wholesale market.
  • Two Step Tiered Platform (TST): A layered distribution level platform interface operated by the local distribution network and an interface between the distribution network‘s platform and AEMO.
  • Independent DSO Framework (IDSO): This is a variant of the TST, whereby an independent party – a DSO is separate from AEMO and the distribution utility.
  • The Hybrid Framework (Hybrid): Seeks to combine the SIP and TST frameworks, whereby AEMO runs a single market platform, but DSOs remain responsible for operating the distribution networks, accessing the market platform to help resolve distribution constraints.

In June 2019, Baringa Partners was appointed to undertake an independent CBA of these frameworks. The aim of the assessment was not to ‘pick a winner’, but to explore the case for change to move to any of the frameworks, and then identify the relative strengths and weaknesses of each framework to help understand the circumstances which might drive one framework over others. We engaged with industry stakeholders to provide the required inputs to both the quantitative and qualitative assessments for each of the frameworks.

We found that there is a clear value in integrating DER into the Australian electricity system, which becomes very significant in a high DER-uptake environment. Although all of the frameworks may be capable of delivering this value, there may need to be a choice made over the different directions of travel captured within the frameworks. In making this choice, we are conscious that the TST and SIP frameworks represent contrasting end-points of market design, and a natural conclusion is that the Hybrid framework represents a pragmatic solution which can bring the best of both frameworks and avoid the weaknesses. As a next step, we therefore recommend trialling a range of hybrid frameworks across Australia, reflecting various flavours of the TST and SIP.

The report is available to download below, or from AEMO here and ENA here.

Assessment of Open Energy Networks Frameworks

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