Market Review: Open

Overview

The NEM is undergoing a significant transformation, with an unprecedented number of generators seeking to connect to the network. The transforming generation fleet has implications for investment in the transmission network, and reform is required to better coordinate investment in these two areas.
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The NEM is undergoing a significant transformation, with an unprecedented number of generators seeking to connect to the network. The transforming generation fleet has implications for investment in the transmission network, and reform is required to better coordinate investment in these two areas. 

Scope of this review

The AEMC must report every two years on drivers that could impact future transmission and generation investment, in accordance with terms of reference from the COAG Energy Council.

The inaugural Coordination of generation and transmission investment review (CoGaTI), completed in December 2018, made recommendations for comprehensive reform to the way investment in generation and transmission is coordinated. 

In February 2019 the AEMC started the second CoGaTI review. Two of our key recommendations from the inaugural CoGaTI final report will be progressed through this second review (CoGaTI implementation - access and charging review). These are:

  • reforms to the way generators access and use the transmission network 
  • a review of the charging arrangements which enable transmission businesses to recover the costs of building and maintaining transmission infrastructure, both within and between regions. 

Consultation 

Consultation paper 

On 1 March 2019 the AEMC published a consultation paper to commence the CoGaTI implementation – access and charging review. 

Supplementary information paper

On 4 April 2019 the AEMC published a supplementary information paper. The paper provides additional information and context to stakeholders about the need for access and charging reforms for the CoGaTI framework. It also provides responses to preliminary stakeholder feedback, and provides answers to frequently asked questions about the recommended CoGaTI access and charging reforms model.

Audio presentation

On 11 April 2019 the AEMC published an audio presentation which provides further explanation of one of the proposed models for reform: dynamic regional pricing. 

The Commission invited stakeholder feedback in response to the questions asked in the consultation paper, and the information provided in the supplementary information paper and audio presentation. Stakeholder submissions were due by 26 April 2019 and can be found below.

Technical working group

We have also formed a technical working group of experts from industry, market bodies and consumer groups. Representatives are from, amongst others:

  • Australian Energy Council and its members
  • Australian Energy Regulator
  • Australian Energy Market Operator
  • Infigen Energy
  • Australian Renewable Energy Agency
  • Aurizon Network
  • Clean Energy Council and its members
  • Clean Energy Finance Corporation
  • Energy Consumers Australia
  • Energy Networks Australia and its members
  • Monash University
  • Public Interest Advocacy Centre
  • Energy Security Board
  • ERM Power

The group will provide technical input into the development and assessment of the proposed reforms.  

Next steps

The Commission will schedule a stakeholder forum mid-year to provide an additional opportunity for input at this stage of the review. This project page will be updated with forum and workshop details once they are arranged, and stakeholders will be advised of the forum and workshop via the AEMC weekly newsletter.

Background

Energy Security Board’s work on transmission 

At the COAG Energy Council meeting on 10 August 2018, the Energy Security Board was requested to report in December 2018 on:

  • how the group 1 projects in AEMO’s Integrated System Plan (ISP) could be delivered as soon as practicable (the ISP forecasts the overall transmission system requirements to support the large amount of new generation connecting to the grid over the next 20 years).
  • how group 2 and 3 projects, should be progressed
  • how the ISP would be converted into an actionable strategic plan.

On 19 December 2018 the Energy Security Board provided a report to the COAG Energy Council outlining how the points listed above should be addressed, and how ISP projects could be delivered as quickly as possible. One of the recommendations made by the Energy Security Board was that congestion and access issues should be examined in 2019. 

Responding to the report, Ministers noted that a rigorous cost benefit analysis will be an essential part of the process to ensure costs to consumers are minimised, and agreed that the Energy Security Board do more work on further measures to operationalise the ISP, including regular updates and reassessments of ISP group 2 and 3 projects. 

AEMC inaugural CoGaTI final report

On 21 December 2018 the AEMC published the final report of its inaugural CoGaTI review.

The final report recommended a comprehensive reform package to better coordinate investment in renewable generation and transmission infrastructure, facilitating transmission and generation in the right place at the right time at an efficient cost. The recommendations complement each other and include:

  • directly link investment decisions by transmission businesses to AEMO’s ISP, to streamline regulatory approval processes for these strategic projects
  • streamline the cost-benefit assessment (the regulatory investment test for transmission – RIT-T) for new transmission by removing duplication from the process
  • manage congestion so the cheapest power can get to consumers. This involves implementing phased reforms to change how generators access and use the network, starting with dynamic regional pricing
  • allow generators to pay for transmission infrastructure in exchange for access to it – which means generators can influence and have control over transmission planning decisions, leading to better coordination of generation and transmission investment
  • examine how to better align the costs of transmission, especially interconnectors, with those that benefit from the investment
  • facilitate renewable energy zones through generators funding of transmission infrastructure
  • make it easier for large-scale storage systems to connect to the network by creating a new registration category to support seamless integration.

These reforms will be progressed through three separate work streams. 

This second CoGaTi review will progress the Commission’s recommendations for reform to current transmission access and charging arrangements.

The Energy Security Board will be leading the work required to action the Integrated System Plan by embedding it in the regulatory framework. This will involve changes to the National Electricity Rules and National Electricity Law.

The Commission’s recommendations for how the RIT-T could be improved for non-Integrated System Plan projects will be progressed as part of the Energy Security Board’s work. The AEMC, AEMO and the AER will work with the Energy Security Board as part of this process.

The Commission’s recommendation for the creation of a new NEM registration category for storage will be progressed via the rule change process. AEMO will be submitting a rule change request to the AEMC on this shortly. 
 

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Documentation