As we explained in detail in this post, the “scheduled lite” or “integrating price responsive resources” (IPRR) mechanism is due to start in 2027. The comms that accompanied the finalisation of that rule may have led you to believe that VPPs have been shut out of the wholesale market for years and the door is finally being opened for the first time.

Not true, baby.

The demand side can already be scheduled, bid against generators, and get paid the spot price if dispatched, through something called the wholesale demand response mechanism (WDRM).

You may have never heard of the WDRM before. If you have heard of it, your views on it are probably one of the following:

a waste of time; or
a wasted opportunity.

The number of people who completely understand the WDRM can probably be counted on two hands and individually named.

Like many NEM mechanisms, the WDRM is imperfect and there are layers of complexity. In this post, we’ll help you better understand the WDRM and work out whether it’s something you should be pursuing over other forms of wholesale market access. This will mostly be of interest to Unscheduled BESS (Battery Energy Storage Systems) project developers and owner-operators but, as always, there’s something in it for everyone.

What is the WDRM?

The explosion of distributed energy resources (DERs) like solar and batteries has seen an ever-increasing focus on ways to bring the demand side into the NEM’s central dispatch. Bringing the demand side (across what are sometimes referred to as Virtual Power Plants or VPPs) into central dispatch has a range of benefits, with two key ones being:

Better visibility and control for AEMO over how and when demand-side resources operate. If done well, this can result in a more predictable grid demand profile, fewer forecasting errors, improved reliability, and lower overall wholesale electricity costs (e.g. AEMO wouldn’t have to procure as much Regulation FCAS).
More opportunities to develop innovative products and services that consumers value which (and, again if done well), can help energy users lower their electricity costs.

After many, many years of contemplation, the wholesale demand response mechanism (WDRM) opened its doors in October 2021.

The WDRM was established around one fundamental premise: from a grid reliability perspective, 1 MW of demand response (DR, i.e. load reduction) is equivalent to 1 MW of generation. Yes, there are losses and network constraints to account for, but at its core this is true. If AEMO needs to serve 5 extra MW of demand in the next dispatch interval, it can deliver this either through dispatching 5MW of generation or 5MW of DR.

The corollary of this fundamental premise is that DR and generation should have equivalent value in the spot market. That’s what the WDRM delivers – a mechanism through which the demand side can bid demand reductions into the spot market, compete with generators to be dispatched, and get paid the prevailing spot price for DR provided if dispatched.

In other words, VPPs competing against big generators in the wholesale market. Geddit?

Steve Carell as Michael Scott in the US Office, saying 'It's happening! Everybody stay calm!' — *Remember when Michael Scott did that routine from Bring the Pain on network television? We will never see those days again.*

How does it work?

The WDRM established a new category of registered participant – the Demand Response Service Provider (DRSP). The creation of this category reflects one other crucial aspect of the mechanism – that DR can be provided by parties other than the customer’s retailer. In the development of the rule change, supporters argued that:

retailers weren’t doing enough to help customers be price-responsive with their demand
ultimately, retailers are incentivised to encourage their customers to use more (not less) electricity
non-retailers, e.g. DR aggregators, are better incentivised and able to activate DR capability.

The DRSP category enables both retailers and non-retailers (e.g. aggregators) to contract with electricity users and sell DR into the wholesale market on the customer’s behalf.

DRSPs apply to AEMO to “classify” a customer’s load as a wholesale demand response unit (WDRU), provided it meets certain eligibility criteria. DSRPs nominate the WDRU’s maximum responsive component – that is, the maximum amount of DR capable of being provided by that load. DRSPs can then choose to aggregate multiple WDRUs into a single portfolio (DUID, or Dispatchable Unit Identifier), for market participation purposes.

BLM brought to the fore

AEMO then applies a baseline methodology (they actually called it BLM during market launch in 2020/21, we’re not joking. It joined PMS [Portfolio Management System] in our list of favourite AEMO acronyms during that period) to each individual WDRU. A baseline is an estimate of a WDRU’s counterfactual demand when dispatched – that is, what the load would have been doing if it hadn’t provided DR. The WDRM needs baselines because AEMO needs something to measure delivered DR against, to determine how much load reduction was provided and therefore how much the DRSP needs to be paid.

BLM design is a dark (black?) art, but in general the intention is to develop an average load profile using the load’s consumption data from comparable days over a recent lookback window.

DR providers offer a form of peaking capacity. Because the cost of curtailing load can be high, DR providers prefer only to be dispatched when spot prices are high. In the NEM, high spot prices are generally seen on high demand days and driven by weather, e.g. heatwaves. So, baseline methodologies will tend to select a load’s most recent high demand days to include in the calculation. They also tend to remove weekends and previous dispatch days, because these do not provide a true counterfactual view.

AEMO has a small number of baseline methodologies for the WDRM. DRSPs will select one of these to apply to each of their WDRUs. In all cases, the load must meet AEMO’s baseline eligibility criteria around accuracy and bias. If the load fails these criteria, i.e. the methodology produces a baseline that is too inaccurate or too biased, it cannot participate in the WDRM.

To participate in the WDRM, a BESS owner-operator with co-located load would need to ensure that the operation of the BESS alongside the site’s normal grid demand enables the creation of an accurate and unbiased baseline.

Dispatch and settlement

DRSPs offer into the NEM on a DUID basis, aggregating the combined DR capacity of the WDRUs under its management. DRSPs offer into the market the same way other scheduled participants do – using the NEM bid stack (ten price-quantity bands to indicate how much DR they are willing to provide at different price points). AEMO will stack WDR offers with generator offers and will dispatch the lowest-cost combination of capacity to meet demand in the upcoming dispatch interval.

While AEMO schedules and dispatches WDRUs on an aggregated (DUID) basis, settlement is calculated on an individual WDRU basis. AEMO will take the difference between the WDRU’s baseline consumption and its actual consumption during the dispatch event to determine the quantity of DR provided. The relevant DRSP then gets paid for the dispatched response (in MWh) at the prevailing spot price. The commercial arrangements between the DRSP and the customer will dictate what happens on the other side of the transaction (some people go for value-sharing, others go for simpler models).

Won’t someone think of the retailer?

Careful readers may wonder what the impact on the retailer is here, particularly their hedging strategy, if their customers are doing this. As you will see from a future post, retailers go to great lengths to ensure that they are well hedged against their retail portfolio, and the purpose of this is to protect against unwanted exposure to high wholesale price periods.

The WDRM was intentionally designed to try and keep retailers whole, i.e. to ensure that the above processes were not unduly undermined by the WDRM.

To deliver this:

AEMO bills the retailer using the customer’s baseline consumption (for the intervals when the load was dispatched), at the prevailing spot price
The retailer bills the customer for actual consumption, at the relevant retail price
The DRSP pays the retailer the difference between what the customer was charged and what AEMO was paid (i.e. baseline minus actual) at a “reimbursement rate” that roughly approximates spot prices during peak demand periods.

Following the rules

DRSPs must conform to dispatch instructions or face significant penalties/market suspension. Conformance is assessed on a DUID basis, i.e. the aggregate performance of the DRSP’s portfolio against AEMO’s dispatch instruction.

In general, the dispatch conformance framework attempts to place the same strict obligations on DRSPs as it does to generators, whilst recognising the fundamental differences in how each provides capacity. Contrast this with the IPRR framework, which proposes to have next to nothing in the way of dispatch compliance for participants.

Other design features to note

Like other scheduled participants, DRSPs are required to send telemetry to AEMO. AEMO is developing its “SCADA-lite” telemetry option to reduce costs for DRSPs and other small participants, but there are still upfront and ongoing costs associated with setting up a telemetry connection and providing live data.
DRSPs must participate in central forecasting processes, like other scheduled participants.
DR can be provided by way of net generation – that is, export from the connection point. This capacity can still be measured against baseline consumption, and exported generation will be valued as such. So, a battery co-located with a load can access the full value of supplying the site’s load and exporting any excess.
But, connection points with only a generator (i.e. no load) cannot participate in the WDRM.
If the WDRU is also providing FCAS, the connection point must be registered as such by the same DRSP. That is – a load cannot be registered with one DRSP for WDRM purposes and another for FCAS purposes.

Challenges

Levels of participation in the WDRM are low. To date, only two businesses have registered to become one – Enel X and Viotas, both demand flexibility aggregators. As at May 2025, there’s 74MW of WDR capacity registered with AEMO. 68MW of that has been registered by Enel X, with the remaining 6MW held by Viotas. The WDRM has been running for nearly 4 years. Most agree that we would have liked to see more capacity participating by now.

Low uptake doesn’t help the cause of those seeking changes or improvements to the WDRM, particularly when something new and shiny is on the table (i.e. IPRR). But, as discussed in our IPRR post, it’s unlikely that IPRR will be the silver bullet AEMO is chasing, so there may well still be a place for the WDRM yet.

Why is uptake so low? Here are a few ideas.

*I reckon the WDRM should go through schema therapy.*

Oh God here’s the B word again

Baselines have a long and sordid history, not just in the NEM but globally too. Demand flexibility proponents see them as a necessary evil – not perfect, but essential if the goal is to value DR properly and increase demand-side participation. Haters see them as inaccurate and ripe for gaming.

Either way, the list of available WDRM baseline methodologies is short, and the baseline eligibility criteria are strict by international standards. While AEMO has been taking steps to help address these matters, current/prospective participants may struggle to scale if too many load types fail the eligibility criteria.

DNSP endorsement barriers

The WDRM introduced a requirement to get the local DNSP’s (Distribution Network Service Provider) endorsement of an aggregation of WDRUs over 5MW, in certain situations. The endorsement process is a way for the DNSP to assess the potential network impact of an aggregation of loads switching off in response to price. On the face of it this seems straightforward, but the general feedback is that the need for the endorsement is unclear, and that the process can drag out and differ greatly between DNSPs.

Strict eligibility

The main eligibility restriction in the WDRM is that only large customers can participate. The distinction between small customer and large customer differs by state and is based on an annual MWh consumption threshold, but in general all residential and small business customers are small customers, and all medium-large commercial and industrial customers are large customers. The arguments for excluding small customers from the WDRM are many and varied and won’t be covered here, but many see this as one big, missed opportunity.

Even for large customers who can participate, the eligibility criteria are narrow and can exclude certain load types entirely, e.g. if it has an unpredictable load profile or has more than one connection point to the grid (mad innit).

Multiple contracts

Not a single retailer has registered to become a DRSP, presumably because retailers prefer to offer demand flexibility within the bounds of their retail products.

When a customer contracts with Enel X or a Viotas for the WDRM, they keep their existing retail contract (with their retailer). Retailers may have the advantage over independent aggregators here purely out of simplicity for the customer, who may not want to contract with two parties for energy services.

Where to next?

The AEMC is currently reviewing the WDRM. Submissions to the consultation paper present stakeholder views along the same lines indicated at the start of this post:

junk it and move on to IPRR already; or
relax the eligibility criteria so more consumers can participate.

We see three possible outcomes of the review:

The AEMC finds that the WDRM should be retained, and improvements made to encourage greater levels of participation.
The AEMC chooses to retain the WDRM, but without improvement. The WDRM quietly ticks along in the background with continued low levels of participation.
The AEMC recommends that the WDRM be phased out entirely, and attempts to refocus existing DRSPs towards the IPRR mechanism.

At this stage, it’s hard to believe that the AEMC would land on option 1.

Is the WDRM for me?

The answer is probably no. If you’re a developer or owner-operator of Unscheduled BESS, you’ve probably already discovered the SGA/SRA mechanism for wholesale market access (if not, you should read about it here). When compared to the WDRM, the SRA framework has lower upfront and ongoing costs, is less complex, and has far fewer compliance obligations.

If you couple the availability of simpler alternatives with the uncertainty about the WDRM’s future, you probably only consider the WDRM if you can’t make the SRA framework work for you. The SRA framework enables <5MW batteries to access the spot price for generation and consumption and is a no-brainer for this configuration.

Does that make the WDRM a “brainer”? Answers on a postcard please.

Wholesale Demand Response - the unknown battler