Role of Demand Flexibility Trading in Australia’s Clean Energy Transition: A Systems Thinking Approach

Project dates: 03/01/2019 - 22/12/2022

Why it matters

As part of Australia’s clean energy transition and the decarbonisation of its economy, the electricity market and electricity grid will need to be transformed. This transformation needs to allow for higher levels of variable renewable energy, the integration of distributed energy resources (DERs), and the orderly exit from the use of coal fired power stations. In this transformed market, electricity market policy makers and regulators have envisaged that smart grid solutions, new business models, and software trading platforms will enable trade in new commodities of flexible load sourced from End Consumers. The current process of energy market reform in Australia is defined by government processes that identify new value streams that may be unlocked by establishing a ‘two-sided market’, that is, a new energy market at the distribution level and trading in flexible load as Demand Flexibility.

The vision for the market in Demand Flexibility, a form of Demand Response, is realised by allowing third party control of End Consumers’ energy assets (DERs) at the required time and location, and result in new value streams. The envisaged trade in demand flexibility will benefit the electrical system as a whole by providing services (a) to balance supply and demand of electricity; (b) to provide voltage and frequency support; (c) to defer or avoid of infrastructure investment; and (d) to enhance system security and resilience. Despite this vision, there are key unknowns: the final design of ‘two-sided market’; how these DER services will be valued; how business and technology innovation processes will result; and how End Consumers can participate in and contribute to, the development and operationalisation of these new markets.

Project Overview

This research project develops a scenario model of the ‘Two-Sided Market’, undertakes an assessment of its’ feasibility and by applying system thinking approach identifies intervention hypotheses to address limitations and constraints. The research project used a mixed methods approach including qualitative analysis (e.g. interviews, surveys, document analysis); and quantitative analysis (e.g. financial analysis, market analysis, econometric modelling and stakeholder mapping). The expected outcome will inform policy makers and new market entrants in obtaining a better understanding of distribution level Demand Flexibility markets and the role of the End Consumer and non-traditional business models, as a provider of liquidity into these future markets.

Project Outcomes


Project Team

Chief Investigator:

Vikki McLeod


Principal supervisor: Adjunct Associate Professor Wendy Miller
Associate supervisor: Professor Marcus Foth, QUT Design Lab
Associate supervisor: Dr Aaron Liu