Markets and Framework

Australia's electricity grid was originally designed to handle one-way distribution of power from large-scale generators to customers. In recent times, there has been an increasing adoption of Distributed Energy Resources (DER) 'plugged' into the electricity grid. Some parts of the Australian energy network are already experiencing periods where two-way electricity flows occur within and between the distribution network and the transmission system.

This bi-directional electricity flow creates challenges for energy networks, whilst also providing opportunity to Australian energy consumers to generate and contribute electricity to the energy network via their DER investment, participate in the energy market, and access new and value-adding energy services, rewards and incentives. 

Increasing penetration of DER can adversely affect distribution network system providers (DNSPs) and AEMO’s ability to sustain a secure and reliable energy supply.

The DER Program Markets and Frameworks workstream was established to address the effective market and technical integration of DER into the energy system.

Markets and Frameworks involves creation of a two-way energy market, the concept for which was developed in consultation with DNSPs through an initiative called Open Energy Networks.

This two-way market will enable consumers to derive value from their DER assets and help create a more secure power system for all Australians.


In June 2018, AEMO and Energy Networks Australia teamed up to open a consultation on the Open Energy Networks Project to identify how best to transition to a two-way electricity grid and associated marketplace that effectively integrates and actively manages DER within Australia’s energy system. 

By creating a two-way electricity grid and associated marketplace with open energy networks, Australian energy consumers will benefit through:

  • Access to new value and choices of energy services
  • The ability to integrate more DER in a consistent way across the grid to more efficiently manage grid stability
  • Rewards and incentives in exchange for providing DER services to the grid
  • Increased visibility of energy usage and a better energy future for all Australians

Open Energy Networks Project

Key activities of this project include: 

  • Initial consultation to explore the proposed frameworks required to integrate DER, including a more active Distribution System Operator (DSO) and the advent of distribution markets. Three frameworks were considered including the Single Integrated Platform, the Two-Step Tiered and the Independent DSO. 
  • International Review to identify system operators that have begun considering system architecture frameworks and defining the roles, responsibilities and control coordination for real-time operation of DER. Global discussions have involved a range of conceptual models for the roles of Distribution System Operator (DSO), Distribution Operator (DO) and Transmission System Operator (TSO). Specifically, Total TSO, Hybrid DSO, and Total DSO. 
  • Smart Grid Architecture Model (SGAM) developed by EA Tech is the outcome of three possible models for DSO architecture. All interactions and interfaces were developed for each model to represent the complex system into its individual parts. 
  • Cost Benefit Analysis to determine the total net benefit of optimising DER for Australia by 2030. The key benefits are assumed to arise from minimising costs associated with electricity generation, transmission and distribution, given increasing levels of DER penetration in the electricity grid. 

Initial Consultation Interim Report – June 2019

The Interim Report provides stakeholders with a summary of key outcomes from the detailed research and engagement phases of the project, and outlines the required capabilities and recommended actions to effectively integrate high levels of DER into the future energy grid – often referred to as a 'smart grid'.

All submissions received from stakeholders and participants in the Initial Consultation are available on the Open Energy Networks consultation page.

International Review

An International Review was commissioned by AEMO to support the Open Energy Networks Project. This review focused on progress made internationally and the steps taken to develop DER coordination frameworks between Distribution and Transmission networks.

Read the International Review and findings:

Smart Grid Architecture Models – EA Tech Report

In collaboration with EA Tech, a series of functional specification workshops were conducted to develop the detailed Smart Grid Architecture Models (SGAMs) for each of the proposed energy market models, including the resultant 'Hybrid model'.

Read more about the proposed frameworks:

Further information about each model can be found in the Energy Networks report:

The Functional Specification Workshops – held in Sydney, Melbourne and Perth – adopted a similar approach to that undertaken in the UK, as discussed in the above-mentioned report.

Cost Benefit Analysis

CSIRO was commissioned to review work already performed in Australia and internationally on cost-benefit analysis of distribution coordination and optimisation of DER.

Based on the review’s findings, the report proposed a framework for a full cost-benefit analysis to determine the total net benefit of optimising DER for Australia by 2030.

As part of the Open Energy Networks project, a cost-benefit analysis was commissioned by Energy Networks Australia and AEMO. Baringa Consulting undertook this cost-benefit analysis of the concepts and models identified. 

How to get involved in the DER Program

  • Stakeholder engagement: AEMO offers interested stakeholders the opportunity to participate and engage in shaping and developing the DER Program and associated workstreams.
  • Education: A series of information sessions will be scheduled to share insights and progress of the DER Program workstreams. More information about DER Program education courses can be found on the AEMO Learning Academy website or via email:
  • Quarterly Progress Reports: AEMO will publish the status of the DER Program workstreams from Q2 FY20.
  • Questions about the DER Program? Email us at:
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