Market Review: Open



The electricity sector transition that is currently under way is changing the dynamics of the power system, including the generation mix. Traditional thermal plants are closing, and more renewable and asynchronous generators are coming to the power system. The transformation of the electricity system is also leading to a small number of large and more centrally located generators being replaced by a large number of relatively small, flexible, asynchronous and geographically dispersed generators. In the next 10 years alone, generation roughly equal to the current size of the national electricity market (50 GW) is expected to connect to the grid. The NEM will replace most of its current stock by 2040.

In addition, the networks across the NEM are becoming more meshed and interconnected, with this resulting in increased inter-regional trade and sharing of reserves between jurisdictions.

Substantial and timely transmission infrastructure is therefore likely to be required. These changes mean that there is a need to have a better way of co-ordinating generation and transmission investment decisions in order to better facilitate the transition that is occurring.

As part of the development of the reforms to better coordinate generation and transmission investment on 14 October 2019 the AEMC published:

Proposed access reform model

The proposed model focuses on changing two inter-related aspects of the current transmission access framework:

  • Wholesale electricity prices. Dynamic regional pricing will be introduced so that large-scale generators and storage will receive a local price that more accurately represents the marginal cost of supplying electricity at their location in the network. Retailers will continue to pay at the regional price. 
  • Financial risk management. Large-scale generators and storage will be better able to manage the risks of congestion and losses by purchasing financial transmission rights. These products will hedge against the price differentials that arise under dynamic regional pricing.

These changes are expected to have a number of benefits to the operation of the NEM both in an operational sense and by improving the signals for investment in generation and transmission. Key benefits include:

  • Generators and storage will be able to obtain more certainty over the operation and revenue of their assets, promoting contract market liquidity both between regions and within regions
  • Generators and storage will have improved incentives to locate in areas of the network, which are more beneficial for the power system
  • Consumers will benefit by having TUOS bills lowered as a result of generators sharing some of the costs of transition
  • AEMO and networks will have better information to incorporate into planning and investment decision-making process

Renewable energy zones

Renewable energy zones are not currently defined in the existing regulatory framework and have been used by different parties to mean different things.

This paper seeks to provide some clarity as to the different ways renewable energy zones can  be characterised, how these can be achieved under the current framework, the various issues that arise under those different characterisations, and how they can be better facilitated in the future. We also set out a proposed model for how renewable energy zones can be facilitated.

Arrangements for implementation of renewable energy zones will complement and work in conjunction with AEMO’s integrated system plan (ISP) and any implementation arrangements for the ISP. 

Next steps

Submissions to the two papers must be lodged with the Commission by 8 November 2019.

The AEMC held a public workshop in Melbourne on 18 October 2019 to provide an overview of the proposed access model, and seek stakeholder feedback. The workshop also addressed the proposed approach to reforms to enable the development of renewable energy zones.

A recording of the webcast from this workshop is available here.

A final report on the proposed COGATI reforms will be published in December 2019.


The need for reform

Proposed generation roughly equal to the current size of the NEM (50 GW) is foreshadowed for connection to the grid over the next 10 years.

This trend is forecast to continue. AEMO's ISP in the 'neutral with storage' modelling scenario shows that by 2030 over 6,000 MW of existing generation is expected to close and be replaced by approximately 22,000 MW of renewable generation and 6,000 MW of storage. By 2040, the amount of expected closure increases to approximately 16,000 MW, which is projected to be replaced by 50,000 MW of renewable generation and 20,000 MW of storage.

Transmission access reform is therefore vital for the NEM to effectively evolve, transition, and co-ordinate investment resulting in least-cost outcomes for consumers.

Energy Security Board’s work on transmission

On 19 December 2018 the Energy Security Board provided a report to the COAG Energy Council outlining how the ISP could be actioned,  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.

The ESB is currently progressing its work on Actioning the ISP, and the Commission is working closely with AEMO on this.

The AEMC’s work on the COGATI reforms

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.

Consultation paper

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

On 4 April 2019, the AEMC published a supplementary information paper which provided additional information and context to stakeholders on the need for COGATI reforms. The paper also provided answers to frequently asked questions about the proposed access model.

Audio presentation

On 11 April 2019 the AEMC published an audio presentation which provided further explanation of one of the proposed models for reform: dynamic regional pricing. The audio presentation can be found here.

Technical working group

The AEMC formed a technical working group of experts from industry, market bodies and consumer groups to consult on the proposed reforms. 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. 

The AEMC has convened three technical working group meetings:

  • on 28 May 2019
  • on 14 June 2019
  • on 5 September 2019.

The discussion notes from these meetings can be found below.

Public forum

The AEMC held a public forum on 8 July 2019 in Melbourne to discuss the transmission access reforms proposed in the COGATI directions paper.

Directions paper

On 27 June 2019 the AEMC published a directions paper. This paper provides detail on the need for transmission access reform, as well as the Commission’s proposed approach to reform.

The directions paper incorporates feedback from stakeholders in response to the consultation paper and the supplementary information paper. Comments and feedback from the technical working group have also been incorporated into this report.

Public workshop

The AEMC held a public workshop in Melbourne on 18 October 2019 to provide an overview of our access reform blueprint, and seek stakeholder feedback on this. 

The workshop also worked through the discussion paper on renewable energy zones.



AEMC documents


Late submissions