No junk mail please: why customers need to know about dynamic operating envelopes


Distribution networks play a critical role in distributing energy on the physical ‘poles and wires’ network to individual customers’ homes and businesses at an agreed quality and reliability. As customers connect greater volumes of solar and other distributed energy resources (DER), distribution networks need to facilitate the two-way flow of energy, with customers exporting energy and other services back to the grid.

In August 2021, the Australian Energy Market Commission (AEMC) published an important rule change determination where export services were established as a core service requirement to be provided by network businesses.  While the decision attracted media attention in enabling distribution networks to charge consumers for exporting energy from their solar, more broadly the reform package clarifies customers’ right to access export services and establishes a regulatory requirement for distribution networks to deliver.

However, as more customers invest in DER, this is impacting distribution networks’ approach to managing network capacity and customers’ ability to access the electricity grid. To enable greater volumes of DER to be connected while keeping energy cost affordable for end users, networks need to optimise the use of the capacity that they have. Alternatively, they would need to invest in costly network infrastructure upgrades, the cost of which would be shared by all end users.

Traditionally, networks have two main levers to manage the flow of energy across their system:

  • Price:  Networks can charge a range of prices to incentivise consumers to shift their energy to different parts of the day.  For example, time of use tariffs aim to move energy usage away from peak periods, like early morning or late afternoon. 
  • Quantity:  Networks can also prescribe how much energy consumers can use at different times of the day.  Historically, networks have used this measure for controlling when customers’ hot water would be heated.  With customers’ uptake of solar, networks have been using this type of measure to limit how much solar each home can generate and export back into the grid. Typically, these export limits have been static and set in most cases at 5kW.  They are referred to as fixed site export limits and are generally enforced through Network Connection Agreements.

To better support the growth in solar generation and its impact on network system security, distribution networks are transitioning away from fixed site export limits towards dynamic export limits and dynamic operating envelopes (DOEs). In theory, DOEs will be able to account for the temporal dimension of network constraints, constraining customers only at specific time periods when the network is impacted by peaks but allowing customers to export more electricity outside of these peak periods.

If implemented well, DOEs could improve the payback period for DER customers whilst also deferring expensive network capital expenditure, thereby supporting more affordable energy costs for consumers.

Realising positive customer outcomes in this transition will require careful regulatory design to:

  • Ensure transparency for customers on how network access limits are set at certain times of the day, month, or year and how customers’ access rights are fairly apportioned;
  • Enable, and not restrict, customers’ ability to participate in aggregation services to provide flexibility services to the broader energy market, through fit-for-purpose interoperability technical standards and network connection agreements; and
  • Establish regulatory oversight at a national level to align implementation and that supports consistent consumer outcomes. 

The introduction of DOEs has been prioritised in the Energy Security Board’s (ESB) DER Implementation Plan as a long-term feature of the NEM DER ecosystem, with mandatory compliance for new solar PV and storage systems anticipated by 2025. Designed in the right way, DOEs could support greater flexibility in the market in alignment with the Post-2025 market design and transition towards a two-sided market, including the participation of aggregation VPP fleets.

The ARENA Distributed Energy Integration Program has been spearheading industry consideration of DOEs through its Dynamic Operating Envelopes Workstream Group. In March, the group published its Outcomes Report that recommends a range of future policy, regulatory, technical and industry actions needed to implement a nationally consistent model for DOEs that will work in consumers’ interests.

In this article, we will explore how putting the customer in the centre of the design will ensure the technical and policy settings for enabling DOEs maximise the customers’ value in their solar purchase while simultaneously maximising the network usage, which benefits all energy consumers.

Initial technical considerations

SAPN Trial

The concept of time-varying and locational export limits was initially trialled by SA Power Networks (SAPN) and Tesla in 2019 through their ARENA funded Advanced VPP Grid Integration project. As the final knowledge sharing report elaborates, the project successfully demonstrated:

  • The ability to exceed static export limits per site through time-varying and locational export limits while maintaining compliance with the limits received via API communications across a variety of network conditions;  
  • The ability to override the forecast export limits in a local area to take into account the impact of planned maintenance or unplanned outages; and
  • Safe and well-defined fallback behaviour in the event of loss of communications.

The project findings supported the view that dynamic network capacity management could enable larger, more active DER and demand management systems to continue to operate under higher levels of DER penetration than would otherwise be possible with static limits.

While the SAPN/Tesla trial tested circumstances where an export limit exceeds static export limits, more information is needed on how DOEs would constrain below a static export limit, including on frequency, transparency and approach.

Communication standards

A key element of a successful DOE framework is having consistent standards of communications so that retailers/aggregators can automate the application of DOEs, regardless of the solar manufacturer and distribution zone.

The energy industry has focused on developing a fit-for-purpose interoperability technical standards framework to support the communication of DOEs. Through the DER API Technical Working Group, industry developed the CSIP-AUS Australian Implementation Guide for IEEE 2030.5 (an international standard that has typically been used by vertically integrated utilities in the US).

While these early activities have paved the way towards the implementation of DOEs, substantial work remains to support positive customer outcomes in the Australian market context.

Unlike overseas jurisdictions where IEEE2030.5 has been applied (in which retail and distribution services are vertically integrated), distribution and retail services are disaggregated in the Australian market and technical standards therefore need to support contestability and customer choice.  The use cases initially implemented in CSIP-AUS focus on network outcomes without sufficient attention given to aggregator use cases that could support more cost-effective outcomes based on the structure of Australia’s energy market system.

To ensure customers are not locked into DER purchases that restrict their ability to maximise the value of their flexible energy, it will be critical that the standard tested, piloted and ultimately applied in Australia supports aggregation use cases at the NMI level.  Customers will then have to select a retailer/aggregator that provides them with the best value by orchestrating their DER assets across multiple value streams, including self-consumption, network services, wholesale and frequency control services.

The practical application of DOEs will need to adequately test customers’ experience in circumstances when DOEs constrain customers’ assets as well as the ability of DOEs to support customers’ participation in aggregation services to provide flexibility services to the broader energy market. Further technical trials are also needed to test the integration of aggregators to DOEs so that customers can continue to realise value from their investment in DER through market participation.

The current implementation of CSIP-AUS does not consider any practical ways for an aggregator to control a device that is also subject to dynamic export limit control by a network. For example, AGL currently has a solar orchestration offering in market in South Australia that rewards customers for allowing AGL to reduce their solar export at times when the wholesale energy price is low, but customers who have a dynamic export limit applied by the network are not able to enrol because the CSIP-AUS standard currently does not consider control signals from two locations arriving at the same inverter. The inflexibility of the standard is impacting customers’ ability to access competitive market offers that reward their participation in favour of mandated control that does not.

While some jurisdictions are racing towards the finish line, many questions remain

As the Dynamic Operating Envelopes Workstream Group elaborated in its Outcomes Report, we are only at the beginning of the journey in understanding the technical and consumer protection requirements to establish an effective regulatory framework.

As far as possible, we believe state governments should only progress regulatory arrangements where they can make ‘no-regrets’ decisions that builds upon relevant industry trials and learnings to mitigate impact to customers.  Importantly, any decisions made at the State level need to align with the general direction of the ESB work program, being that consumers own the DER assets and first and foremost they should be afforded the opportunity to maximise the value of this investment through governance and market arrangements that support this outcome and also protect the reliability of the system.

Nevertheless, some state governments are front running before relevant technical and consumer insights are known, establishing regulatory arrangements to facilitate DOEs:

  • Following the South Australian Government’s Smarter Homes Reforms, the Office of the Technical Regulator has been tasked with established Dynamic Export Limits Requirements that are due to come into effect in December 2022.
  • Energy Queensland established dynamic connection standards that came into effect in December 2021 for connection applications in 2022 and beyond.

Various technical and consumer protection questions remain to be resolved. Among other things, the DEIP Outcomes Report elaborated the following matters for further consideration:

  • Communication protocols. While DEIP considers that the 2030.5 interoperability standards is the right direction, it also acknowledged the need to develop consistent standards through the Interoperability Steering Committee and other forum as essential. As the focus shifts towards integrating aggregators and OEMs into the 2030.5 framework, we consider the approach needs to be informed by a robust cost benefit analysis.

As noted above, DOEs are a network lever to manage the network system security and reliability.  How networks adopt DOEs can impose costs on other parts of the industry (for example, costs associated with DOE compliance obligations).  It is important that a fulsome cost benefit analysis is conducted to identify the least cost and a consistent approach to the application of DOEs.  As pilots and studies turn their attention to integrating aggregators into the application of DOEs it is important aggregators do not have to implement a different system and manage various communication protocols for each of the distribution zones.  This builds unnecessary and high costs into the industry, creating barriers to entry and ultimately dissipates the consumers ability to benefit from well-structured and nationally consistent DOEs. 

  • Compliance obligations. DEIP notes that it is essential that the customer systems that are enrolled in a DOE comply with the DOE instructions. It is important that the compliance burden sit with the party that sets and operates the DOE and that connection agreements are not used to transfer the cost of compliance to other parties.  
  • Customer protections. Customers need to be informed and have relevant information about the application of DOEs including on the magnitude of constraints and how DOEs are delivering overall value, to build trust and social license in the deployment of DOEs into the future.  Transparency needs to be provided before network make an investment decision as part of their regulatory reset proposals, and during the normal course of networks managing the export limits at the site.
  • National standardisation of grid management practices. In our view, there is an associated need to clarify the extent to which the AER will be responsible for oversighting the development and implementation of DOEs and underpinning standards to supports consistent consumer outcomes. For example, the AER could develop a customer impact assessment template that networks are required to complete for DOEs in order to demonstrate net benefit.
  • Broader network regulation. Regulatory oversight is needed to ensure networks are investing in DOEs in an efficient way that meets the national electricity objective consistent with the recent DER access, pricing and incentives reforms that facilitate the two-way flow of energy.
  • Potential future use cases. DEIP suggests that potential uses of DOE infrastructure could include managing system security (including system strength and inertia constraints management) as well as flexible loads such as EVs could be pursued if considered to be in consumers’ interests.

We believe these future matters should be guided by a careful cost benefit analysis that considers alternative approaches that may deliver greater benefit to customers.  For example, market-based solutions that provide customer with choice. In the case of household load, we do not consider that distribution networks have sufficiently demonstrated the need to constrain household load or proven any strong parallel between EV charging and DER such as solar and batteries. We also note that vehicle to grid (V2G) application is still in a demonstration phase and therefore consider that it should not directly inform the regulatory approach at this point in time.

Forging a direction that places customers at the centre of the design framework

AGL supports the introduction of dynamic export limits and dynamic operating envelopes, provided they enable more transparent management of network constraints and provides DER customers with greater access than would otherwise be possible with fixed limits on the size or export limits of the system.

Establishing a smooth implementation pathway will require a nationally coordinated and carefully sequenced approach that resolves key technical concerns and establishes fit-for-purpose consumer protections. To date, the cost externalities of establishing DOEs have been largely ignored but could have a significant impact on the implementation pathway. We also consider that the application of DOEs to load management may sit outside of the National Electricity Rules and should therefore be subject to a detailed legal and cost-benefit analysis.

Priority matters for consideration

We believe the following matters should be considered as a matter of priority:

  1. Define the parameters of DOEs as applying to exports only. As noted above, we do not consider that DOEs should apply to household load. Distribution networks have not sufficiently demonstrated the need to constrain household load or proven any strong parallel between EV charging and DER such as solar and batteries. Introducing dynamic connections to household load risks imposing energy usage constraints on consumers without any compensation or demonstrable benefit. Accordingly, the focus should remain on getting the settings right for dynamic export limits.
  2. Regulation should be evidence-based. We believe the technical integration questions should be progressed through further industry trials to ensure that any regulatory settings are evidence-based. Industry has not yet had the benefit of the final report learnings from SAPN’s ARENA Flexible Export for Solar PV demonstration project to inform the appropriate setting of regulatory arrangements to ensure that customers are not negatively impacted. It will be important to understand the potential barriers to customers integrating with prescribed dynamic exports across a larger cohort of customers and across the lifespan of the demonstration pilot. While we understand that the demonstrations were intended to involve around 800 customers, we also note that early knowledge sharing reports indicated that customers have varied internet setups and gaining connectivity to the inverter/ gateway device (Droplet) varies on a site-to-site basis (some were more difficult that others). We understand that very few inverter systems can currently comply with CSIP-Aus requirements, due in part to the expedited implementation of these arrangements in South Australia. 
  3. Develop an approach to interoperability that enables customer value. While we appreciate that the CSIP-AUS Implementation Guide has now been developed, we remain concerned that the use cases elaborated in CSIP-AUS focus on network outcomes without sufficient attention given to aggregator use cases that could support more cost-effective outcomes in the management of Australia’s energy market system. Whereas networks are proposing to broadcast dynamic network constraints to individual DER or alternatively aggregators or a third party centralised device, we note that aggregators will have contractual arrangements with customers to provide orchestration services that account for only a finite number of market events annually but will nevertheless play an important role in the market integration of DER. Accordingly, industry will need to test the technical integration of aggregators with DOEs.
  4. Clarify the compliance approach. As noted above, it is important that the compliance burden sit with the party that sets and operates the DOE and that connection agreements are not used to transfer the cost of compliance to other parties. 

We also note that the current CSIP-AUS build (and lack of a consumer protection framework) does not require networks or aggregators to notify customers of the difference between curtailment performed by an aggregator or network. This will inevitably undermine consumer trust and lead to conflicts between industry parties. While we appreciate that IEEE 2030.5 entails a communications primacy architecture that requires all communications be mediated through a single communications party, we believe there is a need to consider alternative approaches that would ensure compliance by individual DER assets whilst also providing visibility of distribution networks’ dynamic constraints to customers’ contacted aggregators, in order to enable customers to maximise the value of their investment through participation in orchestration services.

The national reform agenda provides an opportunity to work towards harmonisation

There is an ongoing reform agenda to develop a nationally consistent policy framework that can ensure DER technical standards work in customers’ best interests. This work is being guided principally by the ESB in its DER Implementation Plan and interoperability policy as well as the AEMC’s work on DER technical standards governance.

In our view, sequencing a nationally harmonised approach to DOEs should be informed by the following:

  •  The current policy work program to establish a national interoperability policy, being led by the ESB;
  • The current shortcoming of the Australian implementation guide for IEEE 2030.5 (CSIP-AUS) in its ability to support aggregator use cases that could support more cost-effective outcomes based on the structure of Australia’s energy market system;
  • The need to establish regulatory settings based on proven market trials to ensure technical solutions provide the necessary network security objectives whilst also supporting positive customer outcomes; and
  •  The need to provide appropriate lead times for industry to enable compliance and mitigate any impact to consumers who have already invested in DER.

The technical standards adopted in jurisdictions should also be informed by a harmonised national approach, to reduce cost and complexity for businesses operating across Australia’s energy markets and maximise the potential for all manufacturers to comply. Until this national policy framework is established, there is risk that all manufacturers may not be able to comply with the jurisdictional technical standards, thereby slowing down the sale and uptake of solar.

We look forward to continuing to engage with policymakers and the broader industry to ensure customers enjoy fair and transparent access arrangements that support their participation in Australia’s evolving two-sided market.