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 paper and supplementary information paper

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

The AEMC published a supplementary information paper on 4 April 2019, 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 provides 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 two technical working group meetings: 

  • on 28 May 2019 
  • on 14 June 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.

The public forum agenda and slides from the public forum are available below.

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.

Stakeholder submissions to the directions paper are due by 2 August 2019.

Next steps

The AEMC will publish a draft paper in September 2019 that outlines a detailed design of proposed changes to the settlement arrangements for generators under the new access regime, as well as the key features of a transmission hedge model and how this interfaces with transmission planning and operations. A final report will be published in December 2019.

The third technical working group will be held in August 2019. 

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. The ESB published a consultation paper on actioning the ISP in May 2019.

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Documentation

DIRECTIONS PAPER

AEMC Documents