ENHANCING ELECTRICITY NETWORK
PRODUCTIVITY THROUGH DEMAND MANAGEMENT
AND MARKET BASED REGULATORY REFORM

ABSTRACT
Increasing emphasis has been placed on the role of markets to facilitate improved
economic efficiency and lower electricity prices. However, the potential of com-
petitive market processes in electricity networks has been largely ignored. As a
result, potentially viable and environmentally attractive demand management (DM)
solutions have been unable to compete against traditional network solutions. This
article considers the scope for competitive market reform to remove entrenched
barriers to the participation of DM in electricity network services.
Case study material is provided from recent reform initiatives in New South Wales,
Australia. These reforms contain a number of methodological and policy innova-
tions which enable cost effective DM to compete, including:
The use of marginal avoidable network cost to provide a stronger, more
cost reflective price stimulus for local network augmentation solutions,
The use of mapping tools to transparently inform the market of impending
network capacity constraints and network augmentation value; and
Establishing a Demand Management Code of Practice which emphasises
market based procurement of DM.
International Journal of Distributed Energy Resources, ISSN 1614-7138, Volume 5 Number 2
© 2009 Technology & Science Publishers, Kassel, Germany, http://ts-p