CER - who is responsible for what?

Tell me in a minute

Australia’s energy system is undergoing a profound transformation, driven by the rapid uptake of Consumer Energy Resources (CER) such as rooftop solar, batteries, electric vehicle chargers and controlled loads, with Australia now having the highest proportion of households with rooftop solar globally.[1]

The National Consumer Energy Resources Roadmap, released 19 July 2024,[2] sets out reform priorities to build national consistency and support a harmonised approach to unleashing the full potential of CER.

On 9 July 2025, the Department of Climate Change, Energy, the Environment and Water (DCEEW) began consulting on two key aspects in the National Consumer Energy Resources Roadmap:[3]

This consultation is critical for those looking to participate in the CER ecosystem – so have your say! Submissions are due 20 August 2025.

Along with this consultation there is:

• a broader NEM Wholesale Markets Review (‘Nelson Review’) - you can read KWM’s insight on this here
• Gas Market Review Consultation Paper
• national conversation on productivity (where one of the 5 pillars the Productivity Commission is examining in its productivity inquiry is ‘Investing in cheaper, cleaner energy and the net zero transformation’), and
• consultation by Treasury on an effective delivery of a front door for investment.

While it is promising to see multiple pieces of Government machinery working overtime to enable an effective energy transition, there needs to be co-ordinated Government thinking and decision making to enable the design of cohesive policy to underpin our energy future.

Only one of the three energy market reform options proposed in this consultation is consistent with what’s being proposed in the Nelson Review.  This consistent option aims to enhances CER visibility and participation within the existing wholesale market framework, without introducing new distribution-level markets.  The other market design options proposed in this consultation suggest more significant market reforms in the medium term – read on for more information.

Why does the consultation matter?

This consultation is significant because it seeks to define and assign the capabilities required to run a power system and market awash with CER.  The consultation is particularly for significant implications for Distribution Network Service Providers (DNSPs) as it relates to:

• the role that that DNSPs and other market participants will have in a power system and market with high levels of CER, and
• whether DNSPs have the right information, tools, frameworks and policy guidance to undertake Distribution System Operator (DSO) activities.

M3/P5 Workstream  

The consultation paper seeks stakeholder feedback on three types of reforms:

• Roles of AEMO and TNSPs, DNSPs, customer agents and other parties involved in integrating CER: Clarifying, formalising and standardising roles, expectations and accountabilities in six priority areas such that existing actors can effectively undertake the activities required to integrate CER into the power system and market in the near term (Chapter 3)
• Market design: Structural changes to market arrangements between the network and participating CER assets to incorporate distribution-level CER into a real-time market (Chapter 4)
• Governance reform: Whether DNSPs have the right incentives, objectives and governance arrangements to perform the DSO role in a way that maximises the value of CER (Chapter 5).

The paper is divided into two key focuses – the immediate and medium focuses.

(a) Immediate focus – How to formalise roles in six priority areas (Chapter 3), which we’ve set out in the table below.

The paper identifies six immediate areas of focus (contributing to three major outcomes) where roles, expectations and accountabilities need to be clarified and standardised:

For each of these six immediate areas of focus, the consultation is seeking stakeholder feedback on who should be responsible for clarifying, formalising and standardising the roles, expectations and accountabilities, and what factors should be considered when doing so.

The consultation paper does not prescribe specific actors for each role, but does provide examples of the types of organisations that could be involved.

For example, for maintaining quality CER monitoring data, the paper notes this will involve coordination between DNSPs, TNSPs and AEMO.

The paper states that there is a range of ways that roles can be clarified and formalised, with different outcomes depending on who controls CER, for example:

Who is controlling CER within DOEs has a significant impact on the consumer value proposition (e.g. aggregators that can orchestrate CER can derive value from responding to market price signals whereas DNSPs and other parties may not value this).

(b) Medium term focus – Whether real-time distribution-level market is needed (Chapter 4)

Currently, in the national electricity market (NEM), there is a real-time wholesale electricity market at the transmission level.

Broadly, CER are unable to participate in the central market clearing process, however they can still respond to price changes in the wholesale market through off-market approaches, such as DOEs, DNPs and flexibility services. The consultation explores integrating CER into a real-time market. The consultation paper engaged Cambridge Economic Policy Associates (CEPA) to explore market design options:[5]

1. Design A – Visibility model: Focused evolution of status quo arrangements to improve visibility of unscheduled CER. While it does not introduce real-time market arrangements at the distribution-level, unscheduled CER is explicitly considered in the existing wholesale market through retailer forecasts.
2. Design B – Iterative market with regional prices: Real-time distribution-level market that optimises participating CER and then iterates with the transmission-level market. This option would require the creation of a new role – a Distribution Market Operator.
3. Design C – Centralised market with local prices: Integrated distribution and transmission level market that optimises participating transmission and distribution-level resources in a single optimisation solution.

Of the three market design options, Design A is most consistent with the Nelson Review as it enhances CER visibility and participation within the existing wholesale market framework, without introducing new distribution-level markets. For example, by leveraging voluntary scheduled resource participant categories established under the Integrating Price Response Resources (IPRR) dispatch mode framework[6] (Recommendation 2), or by continuing to rely on off-market mechanisms such as DOEs to manage local constraints (Recommendation 1D).

Designs B and C are broadly contradictory to the Nelson Review, as they propose new distribution-level wholesale energy markets, which the Nelson Review explicitly rejects (Recommendation 1D). According to the Nelson Review, such changes would likely involve significant implementation costs and add complexity for participants engaging across multiple markets and regions, potentially having negative consequences for competition.  

CEPA’s assessment was that Design C is the most likely to effectively integrate CER into the wholesale market and deliver system wide benefits in an energy system.

Stakeholders are asked to consider whether off-market mechanisms (such as DOEs, DNPs and flexibility services), if sufficiently improved, could capture most of the benefits of market orchestration, or whether more fundamental reform will be required as CER penetration increases.

(c) Medium term focus - Governance options, and whether DNSPs should undertake DSO activities (Chapter 5)

The consultation recognises that DNSPs currently perform both Distribution Network Operator (DNO) and DSO roles (ie DNSPs operate the distribution network and build and maintain the network).[7]

However, the consultation notes that the DSO role—particularly in relation to real-time system operation and orchestration of CER—is not clearly defined or consistently regulated. The paper raises the question of whether DSOs have the right incentives, tools, and governance arrangements to perform these roles effectively as CER penetration increases.

The paper explores potential problems that have been identified with DNSPs playing the role of DSO, such as lack of consistency in systems and processes across distribution regions (with 13 DNSPs in the NEM, one in WA and one in NT), and lack of whole of system perspective and preference for network solutions (DNSPs may have financial incentives relating to network options (eg ‘poles and wires’ solutions) over non-network options).

The paper explores four reform options (including identifying the benefits and challenges of each option):

1. Functional and/or accounting separation (ring-fencing) of DSO functions within a DNSP – we’ve seen a level of functional separation in other sectors, like telecommunications
2. Moving DSO functions from DNSPs to a new independent organisation
3. Cresting a new entity responsible for consistency and coordination of systems and processes across DNSPs
4. Pursuing regulatory reform within the existing frameworks to address or mitigate the potential issues

The paper is seeking stakeholder views on both the problems considered to be most relevant when considering the institutional arrangements for DSOs in the NEM, and also views on the options explored.

Implications for DNSPs

The outcomes of this consultation will directly influence the operational landscape for DNSPs in relation to CER integration, including defining and assigning the roles and responsibilities for a high CER future, and whether DNSPs should perform the role of DSO.

DNSPs not previously involved in the development of the papers should consider making submissions to ensure their perspectives are reflected in the final recommendations to the Energy and Climate Change Ministerial Council (due end of 2025).

The consultation is closely linked to other workstreams under the National CER Roadmap and the ongoing NEM review.

Next steps

The consultation is working on a tight timeline. Survey submissions are due by 20 August 2025.

Please reach out to those listed on this update if you have any questions about CER.