Transforming the grid for a renewables-based future

Researchers at the University of Melbourne are part of a world-first project to develop a blueprint for an electricity network that supports local low-carbon technologies.

Technologies such as solar photovoltaic (PV) systems and batteries are key to a low-carbon future. And in Australia, more and more households are embracing the switch, encouraged by significantly cheaper technologies, an intensifying climate challenge, and government incentives.

Today, almost one in four houses in Australia have solar PV systems and there are more than 100,000 residential batteries (University of Melbourne, 2020). By 2040, the Australian Energy Market Operator’s (AEMO) forecasts rooftop solar will represent approximately 13 to 22 percent of total annual energy consumption in the national energy market (AEMO, 2020).

An outdated system

But the grid was not designed for this. It was designed around coal. That is, for large-scale power sources that flow one way, usually from remote mine to consumer in the city, via huge transmission networks, cheaply and efficiently.

PV systems, batteries and other low-carbon technologies such as electric vehicles – known as Distributed Energy Resources (DERs) – are fundamentally different: small, modular and geographically dispersed, built for local generation and consumption of energy (which flows both ways through the grid), and inherently involves consumer-owned assets.

Technically and commercially, this is causing problems for the current system.

Aggregators – relatively new actors in the energy space – are currently filling the gap. Effectively bundling together the DER of households or businesses and their assets to act as a single entity, they enable participation at a system level, offloading stored PV generation and giving them access to the wholesale energy and ancillary service markets.

But as the volume of DER increases, managing them becomes challenging and issues – currently controlled – intensify.

At the level of infrastructure, transmission networks (designed to move power throughout the electricity system via poles and wires to homes or commercial entities) are complicated by simultaneous power exports and energy going in and out.

Because distribution companies – which manage the power poles and wires – can’t control DER or incentivise aggregators to use DER at scale to support network management, network congestions may occur. These issues are typically managed by applying ‘static’ limits to network-connected DER. As DER operation is inherently dynamic, these static limits (commonly 5-kW/phase) may in some cases result in reducing the overall value of investment in DER.

As well as putting pressure on network integrity, there’s major disruption commercially because historically the market was unidirectional by design – made for electricity retailers to buy power from the transmission system and sell it to local customers.

What was a simple market, which only needed to ensure enough power for customers, is now being asked to support the buying and selling of energy from millions of ‘micro-power plants’ in the form of DER owners.

With no established market at this local network level, this means potential technical issues as well as economic inefficiency, which will eventually impact consumers.

“In order to seamlessly integrate large volumes of affordable renewable energy at both centralised and distributed levels, we need the right suites of technical and market solutions and mechanisms in place,” says Professor Pierluigi Mancarella, Chair of Electrical Power Systems at the University of Melbourne.

“Just imagine, suddenly you have thousands of customers selling electricity in a market designed for 100 large scale power plants. Commercially, it's completely disruptive.”

In other words, the issues are fundamental.

“We need to develop completely new concepts around distributed energy,” he says.

This is where Project EDGE comes in – a collaboration between AusNet Services, Mondo Power, the Australian Energy Market Operator (AEMO) and the University of Melbourne.

Integrating (in all senses) renewables into the grid

Awarded funding from the Australian Renewable Energy Agency (ARENA), the multi-year project aims to demonstrate a proof of concept for all facets – technical and commercial – for safely and efficiently integrating DER into the power system and markets.

Primarily, the project will test the concept of ‘operating envelopes’. Essentially time-varying, ‘dynamic’ export and import limits calculated in real time from customers’ premises, and which depend on demand, generation and other DERs nearby, this new concept could ensure network integrity (without distribution companies controlling DER) and allow the trading of local and wholesale network services from the ‘edge’.

“Sometimes, we might need to tighten how much one can export to the grid. For instance, when all PV systems are generating at midday. But, other times, it might be possible to export even more than what can be done with fixed limits,” says Professor Nando Ochoa, Professor of Smart Grids and Power Systems.

“This means we can keep the existing poles and wires, reducing electricity bills, while facilitating the market participation of DER.”

Another key feature of the project is that it brings together all relevant stakeholders across the electricity value chain (including customers, DER owners, aggregators, distributors, the system/market operator, and of course researchers).

For now, it will be off market to allow experimentation without impacting live market activity. But involving all stakeholders is crucial to demonstrating real life capabilities, interactions and complexities of so-called ‘two-sided markets’, so the model can be replicated at scale.

"We need to understand the different roles different actors play in the markets, including large scale generators and regulators, plus new actors such as aggregators. And you need everyone on board – including customers – to move in the right direction.”

This is the really big challenge, says Professor Mancarella.

"It’s difficult to understand because we're talking about physics, economics, engineering, regulation, commercial aspects, and social aspects."

“But this is the work we’re doing with Project EDGE – testing and creating a blueprint for how DER and local service exchanges interact with the wholesale market, developing and testing the trading of services from the grid edge, and involving everyone that makes up this market to show how integration will be better.”

Integration informed by research

The University’s Power and Energy Systems Group – Professor Mancarella, Professor Ochoa and Dr Maria Vrakopoulou along with several other researchers – was brought into the project early on by AusNet (one of Victoria’s five distribution companies) and the Australian Energy Market Operator (AEMO).

The Group is providing research for multiple aspects of the project through the Melbourne Energy Institute.

Making operating envelopes a reality

With AusNet, Professor Nando Ochoa, along with Dr Michael Liu, have already developed algorithms to calculate operating envelopes that are being implemented and soon will be tested as part of the trials. This involves algorithms designed specifically for the three-phase low voltage networks common in urban areas as well as the Single-Wire Earth Return (SWER) networks often used in rural areas.

“One of the biggest challenges for AusNet and any distribution company in the world, is the availability of very good network models close to end consumers – which are needed to calculate operating envelopes. Thanks to this project, we are all learning about these limitations and how can we adapt our algorithms,” says Professor Ochoa.

“Another challenge is the actual implementation of the algorithms within the operational environment of AusNet, called the DER Management System (DERMS). This is not trivial at all. The algorithms are just one part of the new ecosystem where data, forecasts, and the resulting operating envelopes need to seamlessly flow between the DERMS and aggregators. And since it hasn’t been done anywhere else before, there is another learning curve”.

Exploring new markets

The other part of the project focuses on exploring new markets with AusNet. Here, Professor Mancarella and his team are developing algorithms for the aggregator – represented by Mondo – to manage DER portfolios effectively at scale and bid aggregated energy in the wholesale market (like a coal or gas plant does currently).

Essentially, this will allow aggregators to establish a ‘virtual power plant’ that will open up the market to the demand side, with multiple buyers as well as sellers. With the market brought down to distribution level, where DER and customers are, the ability to truly compete with large scale resources is created, resulting in significant benefits to the whole system and all consumers, in terms of reduction of both cost and emissions.

In this ‘techno-economic model’ part of the project, a range of potential market operational options will be tested to understand the costs, benefits and impacts on customers and other stakeholders, and ensure the best ‘blueprint’ is proposed.

"It’s about figuring out how to bring together the commercial aspects and the technical aspects. That’s the work we’re doing with the research. We’re helping to build frameworks for the technical problem, the economic problem, and the social problems – like fairness – which emerge in a social economic context,” says Professor Mancarella.

Research plan

Although Project EDGE will demonstrate the concept of operating envelopes and investigate the associated techno-economic aspects, this is just the tip of the iceberg from a research perspective. The Power and Energy Systems group is also helping define the research plan needed to ensure Australia can successfully adopt these concepts.

“Basically, AEMO and the project team asked us to establish what fundamental research is needed for the emerging concept of distributed energy markets, particularly in light of demonstrating their benefits and scalability beyond the project boundaries and field trials,” says Professor Mancarella.

Greener energy for all

The project is clearly huge and complex. And that’s why all the testing, with all players, is key. But integrating DER into the grid is a massive opportunity for a low-carbon future.

“We’re talking about resources that produce clean energy and can create the flexibility that a decarbonised electricity system will need,” says Professor Mancarella. “The end game is fewer emissions, cheaper, greener electricity, and greater access to renewables for everyone.”

“It's the first project of its kind in Australia, maybe in the world. And the impact will be huge – billions and billions of dollars will flow through these markets in the future. Eventually they’ll be business as usual. It's really exciting. It’s completely transformative.”

With the Project now going into the operational phase, including implementation and testing of some of the algorithms, this is only getting closer.

Learn more about Project EDGE, conducted through the Power and Energy Systems Group and the Melbourne Energy Institute at the University of Melbourne.


  • University of Melbourne. (2020). Project EDGE. Department of Electrical and Electronic Engineering.

First published on 19 August 2022.

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