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Spotlight On May 2022 Glossary


Term Acronym (if applicable) Definition/explanation
Australian Energy Market Commission AEMC  Statutory body that develops the rules that govern the Australian energy and gas markets, conducts reviews and provides advice to government about how the markets should operate.
Australian Energy Market Operator AEMO Statutory body that operates the systems that allow energy to be generated, transmitted and distributed in Australia.
Australian Energy Regulator AER Statutory body that regulates wholesale electricity and gas markets in (primarily eastern and southern) Australia.
Behind the Meter BTM Technologies, services, products and devices usually situated on the customer’s side of the connection point to the network grid.
Cost reflective tariff   Electricity prices structured to reflect the consumption choices of individual consumers, including time of use and demand tariffs.
Consumer Energy Resource CER ECA’s preferred term for Distributed Energy Resource
Demand response product   A product that usually involves rewarding or paying energy consumers to cut or shift their use of power to better match supply.
Demand tariff   An electricity pricing structure that includes a demand or capacity charge for use of the electricity network during specific times and windows.
Distributed Energy Resource DER Small-scale renewable energy generation and storage technologies, services, products and devices
Embedded network   A site with an internal network owned and operated by a site owner that holds an exemption from the AER to on-sell energy to residents.
Energy Consumers Australia ECA Government funded entity that advocates for residential and small business energy consumers.
Energy Security Board ESB Body established by energy ministers to coordinate implementation of recommendations from the Independent Review into Future Security of the National Electricity Market (Finkel Review). Comprised of the chairs of the AEMC, AEMO and AER.
Financially Responsible Market Participant FRMP The entity registered with AEMO that is responsible for a connection point (usually an energy retailer).
Feed-in tariff FIT

The cents paid per kWh for generation from a customer’s renewable energy generator that is fed back into the electricity network.

In NSW, since the end of the Solar Bonus Scheme, retailers are not required to offer a feed-in tariff  but generally choose to do so in order to provide competitive market offers. The NSW Independent Pricing and Regulatory Tribunal (IPART) determines a benchmark to provide a guide to customers as to the value of electricity fed back into the network.

Other states have different feed-in tariff arrangements

Flat tariff   An electricity pricing structure whereby electricity is charged at the same rate per kWh regardless of what time of day or week it is used.
Flexible trading arrangements   A metering setup with  separate connections for generation and consumption at a site. Under current arrangements, one FRMP is responsible for a site as a whole. Under proposed reforms, different market participants would be responsible for the different connections, such as an energy retailer for the consumption connection and a small generation aggregator for the export connection.
Frequency control ancillary services FCAS A market used by AEMO to provide a fast injection of energy or reduction of energy to manage supply and demand in the National Electricity Market (NEM)
Gross solar metering   A metering setup whereby all generation from a customer’s renewable energy generator is fed back into the electricity network. Energy consumption and generation are separately metered, andthe customer does not use any of the renewable energy within the household or business. This type of solar metering has been phased out
Interval meter data   Meter data that breaks down usage into 15-minute or half hourly intervals
Microgrid   A Standalone Power System that services multiple users rather than one user.
National Energy Customer Framework NECF

A national energy reform process, as agreed by the Council of Australian Governments, involving the harmonisation of state-based regulatory frameworks (excluding retail price regulation and community service obligations) for the retail energy market and energy distribution sector into a single set of national rules.

As the Commonwealth Constitution does not give the Federal Government power to legislate over energy, the laws first had to be passed into one of the state parliaments. Afterward, other state jurisdictions  passed their own legislation adopting this law. The national law was passed through the South Australian Parliament, and adopted by:

  • ACT and Tasmania on 1 July 2012
  • South Australia on 1 April 2013
  • NSW on 1 July 2013
  • Queensland on 1 July 2015.

Each jurisdiction can retain some state specific rules that continue in their own jurisdictions

National Electricity Market NEM The wholesale market for the supply of electricity in South Australia, Tasmania, Victoria, New South Wales, ACT and Queensland. Exchange between electricity producers and consumers is facilitated through a pool where output from generators is aggregated and scheduled to meet demand
Net solar metering   A metering setup in which generation from a customer’s renewable energy generator is used by the household or business first, and only excess generation is fed back into the electricity network. This requires bi-directional metering that allows energy to flow both ways
Off-market customer   A customer who lives in a residential park or embedded network where they are on-sold energy rather than connecting directly to the network distribution grid
On-market customer   A customer who is connected to the network distribution grid via a connection point and buys energy from an energy retailer
Power of Choice   A set of reforms commencing 1 December 2017 that shifted responsibility for installing and maintaining meters from network distributors to energy retailers. Further reforms from 1 February 2019 introduced specific timeframe requirements for meters by retailers
Reliability and emergency reserve trader RERT A process used by AEMO to secure reserve generation and demand management. AEMO takes proactive steps to manage forecast shortfalls, but if generation and wholesale demand response is still not sufficient to meet demand, AEMO will call on supply reserves and demand management contracts through the RERT mechanism
Small generation aggregator SGA Market participant that is financially responsible for selling electricity in the NEM on behalf of multiple small generators.
Standalone Power System SAP

A system that operates independently of the electricity network to generate and supply power on site. It typically consists of a renewable energy generator such as a solar photovoltaic array, storage battery and backup generator (eg diesel powered).

Some SAPs are installed and maintained by network distributors. For example, network distributors in NSW are trialling SAPs in regional areas where a high number of network assets supply a proportionally small number of customers.

Some SAPs are installed and maintained privately by individual homeowners or business owners, or by communities.

Solar Bonus Scheme SBS A NSW Government scheme that provided a regulated feed-in tariff of 60 cents per kWh for a first phase of customers and 20 cents per kWh for a second phase of customers. The scheme was open to applicants from July 2010 to April 2011 andthe feed-in tariff benefits came to an end in December 2016
Solar Power Purchase Agreement SPPA

A contract for the sale of a solar generation system that allows a customer to install the system without having to pay upfront.

The SPPA provider installs, owns, operates, and maintains the solar generation system for the term of the agreement. Some agreements may provide for ownership to transfer automatically at the end of the agreement; other agreements may provide for a residual payment to be made by the customer before this occurs.  

The customer agrees to pay the SPPA provider for all the electricity the solar system generates. Generally, this price is less than the price for electricity from the network. To ensure a consistent electricity supply, the customer needs to be connected to the network.

The customer will receive one bill from the SPPA provider for the solar power produced and one bill from the electricity retailer for the electricity consumed from the network.

SPPAs are long-term agreements, normally over 7 years, and may have penalties or conditions for early termination. There are also specific conditions around what happens if the customer sells the house before the term of the agreement expires. The customer may have to pay a residual amount at the end of the contract

Spot market and spot price  

The mechanism that matches the supply of electricity with real-time consumption. Generators offer to supply the market with specific amounts of electricity at particular prices. Offers are made for every 5 minutes of every day. AEMO issues instructions to each generator to produce the required quantity of electricity that will meet demand at all times in the most cost-efficient way, while maintaining the technical security of the power system. AEMO stacks the offer bids of all generators in ascending price order for each 5-minute dispatch period. It dispatches the cheapest generator bids first, then progressively more expensive offers until enough electricity is dispatched to satisfy demand. This results in demand being met at the lowest possible cost.

A dispatch price is determined every 5 minutes. Since 1 July 2021, a settlement price is also determined every 5 minutes (previously it was the average over 30 minutes). These spot prices are then used to settle financial transactions for energy traded in the NEM

Time of use tariff   An electricity pricing structure whereby different prices apply to electricity used at different times of the day
Virtual Power Plant VPP

A type of demand response product that utilises a customer’s household battery to export electricity in response to changes in demand on the NEM. For example, when batteries installed on multiple homes are aggregated by an energy retailer and/or a third-party battery provider, small customers can:

  • trade energy on the wholesale market, or
  • participate in the FCAS market and RERT programs run by AEMO.

To participate in the VPP, the customer must allow an energy retailer or battery provider to take over control of the battery installed at their home. This is usually done remotely using software installed on the inverter.

The customer contract for a VPP product might be bundled ‘with the customer’s contract with their energy retailer, or it may be a stand-alone contract that is not connected to the customer’s retail plan.

At least one of the entities involved in operating a VPP must be a FRMP. This is because only an energy retailer can buy and sell energy at the connection point to the customer’s home. However, a number of VPP providers operate as white label brands under the authorisation of an existing energy retailer

White label   White label retailers (brands) are created and operated by one entity under the authorisation already granted by the AER to another entity.