New technical standards for inverters provides greater certainty for distribution network service providers

By Dan Howard, Stephanie Centorame, Faith Taylor and Romany Sloan
18 Mar 2021
A final rule determination made by the Australian Energy Market Commission, set to take effect on 18 December 2021, seeks to address ongoing concerns of distribution network service providers arising from an increased use of small rooftop solar generators in the national electricity market and the variability of the standards of those systems across the various networks.

On 25 February 2021, the Australian Energy Market Commission (AEMC), announced it would be implementing compulsory new standards that will apply to inverters (being, equipment that converts direct current (DC) from small solar generators to alternating current (AC) in order for that electricity to be used in existing loads).

The AEMC's final rule determination (AEMC Final Rule) has the effect that, as at 18 December 2021:

  • all new or replacement micro-embedded generators connecting to distribution networks;
  • model standing offers for basic micro embedded generator connection services for embedded generating units which are the subject of a basic micro EG connection service; and
  • all new connection and replacement inverters and connection alterations (including upgrade, extension, expansion or augmentation),

must comply with the DER Technical Standards specified in the National Electricity Rules (NER) (which includes Australian Standard AS 4777.2:2020, published in December 2020, and as updated from time to time).

The AEMC Final Rule also applies existing compliance and monitoring systems under the Clean Energy Council (CEC) and the Clean Energy Regulator (CER) concerning the certification of products and installers of electricity-generating systems.

Why has the AEMC Final Rule been made?

On 5 May 2020, the Australian Energy Market Operator (in co-operation with the Energy Security Board (ESB)) submitted a rule change request seeking the creation of a subordinate instrument under the NER to set initial minimum technical standards for distributed energy resources (DER). The rule change request was made because:

  • there are gaps in current technical standards for DER which are creating significant risks across the NEM;
  • in the absence of minimum technical standards, exponential growth in DER will make power system operations sub-optimal. It was argued this may increase a reliance on inefficient interventions to manage waning system security parameters such as voltage, thermal capacity or inertia; and
  • critical DER capabilities should be standardised in line with network connection frameworks to ensure more efficient integration of DER into the grid.

The move on the part of the AEMC to use existing rules and industry frameworks such as the DER Technical Standards has been met with broad industry support as the alternative option (creating a new process through which to establish technical standards) would have more likely resulted in duplication of costs to be borne by consumers.

When will the AEMC Final Rule take effect?

The terms of the AEMC Final Rule will take effect from 18 December 2021, being the date on which AS 4777.2:2020 will become in force. The Commencement Date represents a clear demarcation of the applicable technical requirements which industry participants must comply with, and will allow reasonable time for participants to prepare for its implementation.

The AEMC Final Rule's transitional provisions provide further clarity on the application of the new requirements for connection processes under Chapter 5A of the NER that will be ongoing at the time of the Commencement Date, namely:

  • the AEMC Final Rule does not seek to alter the terms of any existing connection contracts;
  • if, prior to the Commencement Date, a valid connection offer from a distribution network service provider has been made in respect of a connection application, but a connection contract has not yet been entered into, then then the former Chapter 5A of the NER in force before the Commencement Date will apply in respect of that connection application; and
  • the new Chapter 5A of the NER as in force on or after the Commencement Date will apply to any connection offer made, or formation of connection contracts occurring, on or after the Commencement Date in respect of the existing connection application.

The AEMC Final Rule applies to all jurisdictions in the NEM (Queensland, New South Wales, the Australian Capital Territory, Victoria, South Australia and Tasmania).

What does this mean for industry participants?

For companies providing solar installations and inverters, it will be essential to ensure that the systems meet the new industry standards on and from 18 December 2021. Further supply and install companies must keep up to date with any future standards changes which can be more readily introduced to update or replace these new standards.

Likewise distributors need to be aware of the new standards and ensure that their connection offers and connection agreements reflect the new standards on and from the Commencement Date.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.