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The way that energy is generated, distributed and consumed in Australia is changing and technology is a key enabler of this change. Rather than electricity being exclusively generated by large power stations, it is increasingly being sourced from consumer-owned assets like rooftop solar panels, batteries, electric vehicles and chargers, known as Consumer Energy Resources (CER) (otherwise known as distributed energy resources), in homes and businesses across Australia.
The rapid adoption of consumer CER offers substantial and exciting benefits, like advancing decarbonisation and lowering energy costs.
However, as well as raising market structure and regulatory challenges, it also introduces additional considerations about cyber security, privacy and technology.
In this five-part series, we will explore the emerging opportunities and challenges associated with the uptake of CER in Australia from a tech law perspective, with a focus on privacy and data, AI and automation, cyber security and contracting to enable the transition to CER.
What is Consumer Energy?
In a nutshell
CER refers to the concept of consumer-owned devices that are capable of generating, storing, or managing electricity.
Overview of the supply chain
Broad uptake of CER has transformed the National Electricity Market landscape. The grid was originally designed for large-scale, one-way electricity generation, transmission and distribution to the global change to consumer. Now, the grid requires a functional relationship between the end-user, who can generate their own electricity, and the grid, and bi-directional capability.
Small-scale CER located at the household and businesses can export and store energy. Solar PV, batteries and smart meters, sometimes in combination with Virtual Power Plants or microgrid technologies, allows for the two-way flow of energy from behind-the-meter back to the ‘distribution’ stage of the energy supply chain. This excess energy can be redistributed to other residential and commercial end users for use, mostly during the middle of the day.
The diagram below provides an overview of the consumer energy supply chain:
How Consumer Energy Resources Work
CER are small-scale generation units or systems owned by consumers and small businesses that, in most cases, generate renewable electricity behind-the-meter. CER includes any devices that use, generate or store electricity, including rooftop solar, batteries and electric vehicles (EVs) and smart inverters. Smart meters (or Advanced Metering Infrastructure) play a crucial role in the effective integration and management of CER insofar as they allow two-way communication between utilities and consumers, support dynamic pricing, and help utilities to better manage the grid with the increased presence of CER.
Traditionally, electricity infrastructure was designed to deliver electricity in one direction – from large-scale generation units to consumers. Widespread uptake of CER has transformed the landscape of the National Electricity Market by allowing CER users to sell excess electricity back to the grid. Effective integration of CER energy back into the grid presents technical challenges for the operation of distribution networks. For example, network voltages must be maintained within an acceptable range at customer premises to ensure safe and reliable operation of equipment and appliances.
VPPs are being developed to provide a way to manage the discharge of energy from home batteries to the grid when needed. At a high level, VPPs aggregate a network of CER together as a single power plant and manage the distribution of energy across a fleet of participating CER owners. A third party (an aggregator or retailer) contracts with consumers for virtual access to their CER. In return, CER owners may receive financial rewards such as feed-in tariffs and reduced energy bills.
CER owners do not have to connect their systems back into the grid, by VPP or otherwise. A CER that is complete with its own battery can function as its own micro-grid, completely disconnected from the National Electricity Market (although instances of this are relatively rare at the moment). Unlike a VPP which manages electricity transactions over a broader region through the wholesale market, a micro-grid typically operates in a defined infrastructure boundary.
CER Examples
Why does it matter?
The Australian energy landscape is characterised by high penetration of renewable energy, with Australians embracing rooftop solar at double the rate of any other nation.[1] Australian households have spent at least $25 billion on rooftop solar and other CER, with nearly one in every three houses in Australian suburbs generating a significant portion of their daily energy from CER. Australia’s commitment to 82 per cent renewables by 2030 means that this is an area that is not likely to slow down,[2] with a joint publication by Energy Networks Australia and the CSIRO anticipating that by 2050 over 60 per cent of energy consumers will have a CER on site.[3]
The boom in rooftop solar, along with other similar trends for electric vehicles and battery storage, has created an exciting opportunity to transform the distribution network into an intelligent grid that maximises the value from CER and reduces the need for large scale generation and transmission.
Technology will play a key role in the transition to CER. The integration of new technologies and methods to enable CER brings opportunities and challenges. In the tech law space, opportunities and challenges arise in cyber security risks, AI and automation issues, privacy issues and contracting.
Case studies
Tech legal issues
In this series, we will be delving into the key tech law focus areas we consider should be at the forefront of Australia’s transition toward a decentralised energy system. They include:
1. Consumer energy: data and privacy
An under-explored area of increasing importance is the nexus between CER, data governance and the Privacy Act 1988 (Cth). In this article, we will identify and discuss the types of data relevant to CER and key considerations for responsible data management. We explore the application of the Privacy Act to CER infrastructure and operation and highlight key obligations for players in this space. We will provide practical insights to facilitate compliance to help CER stakeholders navigate the challenges of data governance and privacy effectively.
2. Consumer energy: artificial intelligence and automation
Although artificial intelligence (AI) has been part of our digital economy for some time, 2023 has seen a sudden spike in interest, particularly relating to generative AI and its adoption by businesses. In this article, we will explore the potential for AI to be deployed in CER, risks to watch out for, and an update on the regulation of AI in Australia.
3. Consumer energy: cyber security
Cyber security plays a critical role in the consumer energy ecosystem. Energy companies and infrastructure often blend a mix of old and new technologies. While the older technology was not necessarily designed with the latest security concerns in mind, newer technology brings its own set of security challenges. IoT devices, for example, create more attack vectors and collect significant amounts of data. In this article, we will explore the vulnerabilities inherent in CER networks and offer insights into how to mitigate risks associated with internet-connected CER, supply chain and infrastructure. We will consider the existing standards and regulatory regimes that apply to CER in this context and will draw on case studies to provide practical insights and lessons learned from cybers security incidents in the energy sector.
4. Consumer energy: contracting
Key to the uptake and successful deployment of CER is well-drafted contracts that are tailored to the consumer energy technology. In this publication, we will explore key topics concerning contracting structure, cost allocation, intellectual property rights, risk allocation, technology service levels, data protection and regulatory compliance in CER-related contracts.
KWM is invested in the successful uptake, use and integration of CER in Australia. We acknowledge the challenges associated with updating our grid, which has been designed for traditional forms of energy generation and transfer. We also acknowledge the challenges associated with CER. Along with the challenges are plenty of opportunities. This article series is part of our contribution to this important conversation.
Please feel free to reach out to our team to discuss CER further.
