The AEMC today updated stakeholders on how we plan to consult in the next phase of the reforms to better integrate new technologies into the national electricity grid.
In March, the COAG Energy Council asked us to continue designing the access reforms as part of the Energy Security Board’s post 2025 market design process. We are taking the lead on this particular workstream of the ESB’s 2025 project, and so will design the access model and draft a package of rule changes as part of this work, due for completion by the end of the year.
We will also conduct quantitative modelling and incorporate what we learn from this into the final access model design.
A critical part of the work over coming months will be to consult with stakeholders on the detail of the model design, as well as considering the interactions between access reform and the other ESB 2025 workstreams.
To date in 2020, we have held one public forum and three technical working group meetings. The technical working group assists with the detailed design of the model and includes representatives from industry, consumer bodies and market bodies. This year, it has expanded to include the ESB’s 2025 working group members.
We have more stakeholder engagement opportunities upcoming:
- We will hold two more public forums on draft results of our quantitative modelling (July) and on a simplified model (August). Final dates will be available soon. See details below on how to register your interest to attend.
- Further multiple technical working group meetings will be held between July and August. We will publish a list of these meetings on our website and contact group members shortly.
- We will undertake another round of formal consultation in Q3 2020 to gain up to date stakeholder views, including on the current technical specification and modelling results.
The access reform model
The access reform model has two core elements: locational marginal pricing and financial transmission rights. This approach, while new to Australia, has been successfully in place for decades in many parts of the world including New Zealand, North America and Singapore.
Locational marginal pricing creates a more precise market instrument that will reduce costs for consumers by enabling the cheapest/lowest emissions energy mix to be dispatched. It does this by paying generators the actual value of supplying electricity from where they are physically located rather than the current regional price, which is paid to all generators in a region regardless of the value of the energy they produce. Locational price signals also make it more likely that new generation investment is located in the parts of the network where it can deliver the greatest benefit to consumers in the longer term.
Financial transmission rights allow generators to hedge changes in revenue when local prices are different to the regional reference price. This will act as a risk management tool to give them more certainty around the amount of profit they will make.
The work during 2020 will customise this approach to the National Electricity Market and develop the detailed design of the model.
The access reforms are an important project within the ESB’s post-2025 design process. They will underpin other major ESB reforms that are currently being considered.
We are working closely with the ESB to make sure these reforms are integrated and complementary. In particular, locational marginal pricing and financial transmission rights are a necessary feature of two-sided and ahead markets. Without the means to manage congestion risk, parties may not be willing to provide as much capacity as they could in a two-sided and ahead market. Therefore, the changes recommended in COGATI are critical elements for achieving a two-sided and ahead market.
Media: Kellie Bisset, Media and Content Manager, 0438 490 041 or (02) 8296 7813