Final results from independent modelling of the transmission access reforms being developed under the Energy Security Board’s 2025 market design show the reforms will deliver at least $6 billion in consumer benefits.
The modelling, done by global independent consultant NERA Economic Consulting, found that between 2026 and 2040, the likely benefit to consumers will be between $6.2 billion and $8.2 billion.
The AEMC commissioned the modelling after stakeholders requested an independent assessment of the likely economic impact of the proposed reforms.
This benefit comprises both benefits to society as a whole from lower system costs and a transfer from energy generators to consumers as a result of changing the way energy is priced in the National Electricity Market.
The societal benefits include:
- capital fuel cost savings as a result of electricity generators being located more efficiently
- efficiencies in the way energy is dispatched
- savings from changing the method of calculating energy that is generated but lost as heat before it reaches consumers.
The modelling shows that the benefits will begin to accrue immediately – saving consumers between $400million and $660million in 2026 if the regime was to be implemented at this time. The benefits will accelerate over time and be incurred more quickly if there is a more rapid exit of coal-fired power from the market than previously anticipated. It is also clear that the scale of the benefits suggests that any implementation costs will be an order of magnitude below the estimated benefits
How transmission access reform will work
Transmission access reform involves paying generators the actual value of supplying electricity from the location they’re in, rather than a one-size-fits-all reference price for each region. When there’s congestion in a part of the grid, the value will drop, returning to the reference price when congestion eases. The change is designed to be a transparent way of allocating the risks associated with power system physics – risks that have always been there. And it is designed to create sharper incentives for generators to locate in areas that work better for consumers and removes barriers to batteries.
Under the reforms, existing generators will be able to manage the risk of lost revenue from congestion by buying financial transmission rights (FTRs) in advance. A report on the detailed design of the transmission access model explains how these Financial Transmission Rights will work. The AEMC has increased the length of these rights to 10 years after feedback from stakeholders on the need for greater investment certainty.
The reforms, together with building more transmission in the right places in line with AEMO’s Integrated Systems Plan, will address the congestion and access issues that are currently challenging the grid.
The AEMC has consulted extensively on transmission access reform via more than 150 submissions, 200 bilateral meetings, two public forums and 12 meetings of our technical working group, made up of more than 40 government, industry and consumer representatives. We have adapted the model based on this input, particularly via our technical working group which has guided the final model design and steered the methodology used for the NERA modelling. There is also considerable work underway to integrate these reforms with the other six market design initiatives being developed by the ESB.
As well as conducting extensive modelling and making FTRs firmer, other key changes made as a result of consultation include reducing the complexity of the model by decreasing the number of FTRs on offer at the outset and preparing the way for change with a ‘soft start’ that can be scaled up over time. There will also be a four-year delay between making the new market rules and implementing them to help the market prepare for change.
While the scale of the change requires new ways of working, it will deliver the best solution for the most people. In better locating electricity generators, we will be able to ensure the transmission infrastructure that is built is more effectively used. This will keep electricity prices as low as possible as well as keeping the power system stable.
For information contact:
Media: Kellie Bisset, Media and Content Manager, 0438 490 041 or (02) 8296 7813