The Australian Energy Market Commission is advancing its extensive stakeholder engagement on the transmission access reforms being developed under the Energy Security Board’s post 2025 market design.
We have published materials from two recent public forums on the reforms, which will help stakeholders prepare submissions to the interim report.
This follows the publication of the interim report, Transmission access reform: Updated technical specifications and cost-benefit analysis on 7 September, which was published as part of the post 2025 process. Submissions to the paper are due on 19 October 2020. The paper was based on inputs including 151 written submissions on four papers released since June 2019, 12 working group meetings, three public forums and over 200 bilateral meetings and workshops.
The proposed transmission access reform model is central to addressing grid issues that have arisen as the electricity system transitions. Existing transmission arrangements suit large, centrally located generators and weren’t designed to manage increasing amounts of smaller, spread out, mainly renewable generation and storage like batteries and pumped hydro. Adaptation is critical as the National Electricity Market will replace most of its current generation stock by 2040. The electricity system of the future is likely to be characterised by many relatively small and geographically dispersed renewable generators, connecting to windy or sunny parts of the network, which historically have not needed large amounts of transmission capacity.
Reforming transmission access, along with actioning the Integrated System Plan so the right transmission is built, will create sharper price signals so new generators locate in ways that better use transmission, both now and into the future. This will help manage grid congestion, keep power prices down as the grid transitions and is predicted to result in considerable consumer savings.
The AEMC is taking the lead on the transmission access reform work stream of the ESB’s 2025 project. The access reform model proposed has two core elements: locational marginal pricing (LMP) and financial transmission rights (FTRs). 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. The AEMC has now held two public forums, addressing the benefits of the reform, and providing stakeholders with an opportunity of seeing how the reforms will work in practice. The forums were widely attended and addressed:
- The Results of quantitative modelling conducted by NERA Economic Consulting on the impact of the reforms in the NEM. This forum was held on 17 September. It provided participants with a summary of the results of detailed bottom-up modelling of the benefits of the reform in the NEM, reflecting $6.2 billion to $8.2 billion of total consumer benefit expected from the implementation of the reform until 2040. The forum also took a number of questions from participants on the approach and outcomes from the modelling.
- A simplified model of the reforms in action. This forum was held on 22 September. It helped explain to stakeholders how the model for LMP and FTRs will work and what its benefits are, using a simplified four-node market model.
Materials from both forums are available on the website including presentations (17 September and 22 September), questions raised and answers from the project team (Q & A) and minutes of the technical working group. A transcript of both forums and a video recording providing instructions, presented at the forum, for the operation of the simplified model will also be released shortly.
Links to the simplified model and the installation and user guide are available here.
On 25 September, the AEMC also held a technical working group on the updated technical specifications interim report.
The working group gave participants an opportunity to provide feedback on the complete design for transmission access reform as a whole package of reform, including all elements of the design in relation to LMPs, FTRs and transitional arrangements for the allocation of FTRs to existing market participants.
We updated the working group on work currently underway to assess in detail the implementation costs of reform, which will include extensive consultation with the market operator, AEMO, and market participants. This process will be the subject of future technical working groups. Input to this work by participants will help the Commission form the most accurate view of costs possible, and help to inform the implementation process, keeping these costs to a minimum for both the market operator and participants.
We will also conduct extensive bilateral consultation with market participants on the costs of reform.
Public consultation is essential to developing and implementing these reforms. We look forward to further consultation with the technical working group and stakeholders more widely, as we continue the process of developing this essential reform, as part of the ESB’s post 2025 market design process.
For information contact:
Forum participants: Daniela Moraes at Daniela.firstname.lastname@example.org
Media: Kellie Bisset, Media and Content Manager, 0438 490 041 or (02) 8296 7813