Market Reviews: Completed

Optional Firm Access, Design and Testing

Reference:
EPR0039
Reviewed by:
AEMC
Date completed:
09-Jul-2015
Overview

On 9 July 2015 the Australian Energy Market Commission (AEMC) published the Final Report for the Optional Firm Access, Design and Testing review, which was completed at the COAG Energy Council’s request. The recommendations in the Final Reports will now be considered by the COAG Energy Council.

On 9 July 2015 the Australian Energy Market Commission (AEMC) published the Final Report for the Optional Firm Access, Design and Testing review, which was completed at the COAG Energy Council’s request. The recommendations in the Final Reports will now be considered by the COAG Energy Council.

The Commission’s assessment is that, in the current environment, the implementation of optional firm access would not contribute to the National Electricity Objective. However, it could be beneficial in a future environment where there is significant investment, but the patterns of that investment are uncertain. Accordingly, the Commission recommends regular reporting and assessment on a series of drivers of transmission and generation investment.

It may also be beneficial to improve transparency regarding the level of co-ordination between transmission and generation in the National Electricity Market (NEM) in the future. In particular, the Commission recommends:

  • increasing the level of transparency relating to the effect of transmission connections in the NEM on the  network;
  • reviewing the requirements in the National Electricity Rules on making information about generator funded augmentations available; and
  • extending the application of the Regulatory Investment Test for Transmission to apply to relatively major network replacements on major transmission flow paths;

Further information on these recommendations is contained in our Final Report, which comprises two volumes:

  • Volume 1 sets out the Commission’s final assessment of whether optional firm access would contribute to the National Electricity Objective, and the Commission’s final recommendation on whether optional firm access should be implemented. It also sets out the Commission’s recommendations relating to a reporting regime and measures to increase transparency.
  • Volume 2 provides an overview of the optional firm access model that has been designed and developed during this review.

There is also an accompanying Technical Report, which provides a detailed technical description of the optional firm access model.

Background

In April 2013 the AEMC published the Final Report of the Transmission Frameworks Review. This report outlined a transmission model known as optional firm access.

Under the optional firm access proposal generators would drive and pay for some of the transmission investment required by the market in return for more certainty of access to networks. At the same time they would be encouraged to factor in transmission costs when deciding where to build new generation. Better aligning transmission and generation investment has the potential to minimise prices for customers in the longer term.

While optional firm access had the potential to deliver long term benefits to the NEM, the Commission recognised that there were likely to be costs and risks associated with its implementation. Therefore, the Commission recommended that a design and testing program for optional firm access should be commissioned, which would allow for the better assessment of the costs and benefits associated with the model.

Terms of Reference

On 25 February 2014 the AEMC received terms of reference from the COAG Energy Council that requested that the AEMC:

  • confirm or modify the design of the optional firm access model as a result of testing and evaluation;
  • engage with industry participants and governments to build understanding of the model and the potential impacts of its implementation; and
  • recommend whether to implement the optional firm access model, and if so, how it could be implemented.

AEMO co-operation

The COAG Energy Council also requested that the Australian Energy Market Operator (AEMO) undertake an associated work program. AEMO’s project page on the work relating to the optional firm access model is available here.

First Interim Report

On 24 July 2014 the AEMC published the First Interim Report for the Optional Firm Access, Design and Testing Review. This report largely focussed on work we had done to develop “core” design elements of the optional firm access model. We also included our initial work on how we would approach the assessment of the impacts of optional firm access.

First Interim Report: Public Forum

The Commission held a public forum on the key issues raised in the First Interim Report in Sydney on 14 August 2014. An agenda and presentations for the forum, can be found below.

Supplementary Report on Pricing

On Thursday 30 October 2014 the AEMC published a Supplementary Report on Pricing for the Optional Firm Access, Design and Testing Review for stakeholder feedback. The report provided a progress update on the access pricing element of the optional firm access model.

As part of this update, we developed a prototype pricing model in order to better understand how the pricing method could be implemented in practice. The prototype pricing model and accompanying user guide, are available for stakeholders to download below.

Supplementary Report on Pricing: Workshops

The AEMC held two workshops on the issues raised in the Supplementary Report in Sydney on 13 November; and Melbourne on 14 November 2014. An agenda and presentations for the workshops, can be found below.

Request for comment on the need for Optional Firm Access

On Friday 5 December 2014, the AEMC published a note that:

  • acknowledged the problems and concerns that stakeholders have raised about the need for OFA and confirms that the Commission is taking these into account; and
  • asked stakeholders to comment more specifically on their concerns – in particular did stakeholders think that the problems raised as part of the Transmission Frameworks Review were no longer relevant, and would never again be so.

Responses were factored into the Commission’s recommendations.

Draft Report

On Thursday 12 March 2015, the AEMC published its Draft Report on this review, which set out the Commission’s draft assessment as to whether optional firm access would contribute to the National Electricity Objective, and so the draft recommendation on whether optional firm access should be implemented. This also contained an overview of the optional firm access model that has been designed and developed during this review.

Working Group and Advisory Panel

The AEMC also established an:

  • Advisory Panel to provide strategic advice on high-level issues; and
  • Working Group to provide technical advice and to help with assessing the potential impacts of the optional firm access model on industry.

Further information on the membership of these groups, and a synopsis of the meetings held can be found in the Initiation section below.

 

 

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Documentation

AEMC Documents

AEMC Documents

Consultant reports

Submissions on Draft Report

Late Submissions

AEMC Documents

Submissions on the Request for Comment

Late submissions

AEMC Documents

Presentation from the pricing workshop

Submissions on the Supplementary Report on Pricing

Late submissions

AEMC Documents

Presentations from the public forum

Submissions on First Interim Report

Late submissions

AEMC Documents

Advisory panel meetings

Working group meetings