The AEMC-established technical working group on grid access reform held its 10th meeting last week and focussed on the process of smoothly transitioning the grid.
Reforming transmission access is crucial to ensuring that Australia achieves a low emissions power system in the cheapest and fastest way that is fairest for everyone.
The latest meeting of the working group, which has more than 40 members, discussed approaches to providing a timely and smooth transition to the access reform model. It also tested the level of support for measures to simplify the access reform model through the use of FTR trading hubs, and if so, how trading hubs might be implemented.
The technical working group is a key part of the transmission access reform work the AEMC is leading as part of the Energy Security Board’s post 2025 market design process. This work is fundamental to better integrating new technologies into the national grid.
During the course of the year, we are working with stakeholders to inform our thinking as we refine the model for transmission access reform.
Introducing financial transmission rights (FTRs) is a key part of the model designed to enable electricity generators to better manage risk. The technical working group discussed allocating transitional FTRs to existing market participants as a way to smoothly introduce the access reform model. The meeting discussed who these market participants would be e.g. would they include recent entrants before the reform is finalised.
The meeting also canvassed the use of FTR trading hubs as a way to reduce the number of paths in the national electricity market (NEM) on which FTRs will be allocated and traded in order to simplify the model.
It focused on a number of questions in relation to the transitional allocation of FTRs including:
- how long the transitional allocation of FTRs should last
- to whom the transitional allocation should be provided
- how the available transitional FTRs should be allocated between different parties.
In relation to simplifying the model the meeting discussed:
- whether this is desirable
- how many hubs would be appropriate
- the impact on the firmness and liquidity of FTRs
- the impact on market power.
Transmission access reform is a major rethink of the NEM and so putting measures in place to allow enough time for transition and ensuring change is done smoothly and applied as simply as possible to benefit participants are important steps in the process. A smooth transition to reform is also provided both through a four year implementation timeframe and a multi-year transitional allocation of FTRs providing participants with a “soft start” to grid access reform.
Ensuring a smooth transition should provide market participants and the Australian Energy Market Operator with a learning and adjustment period, minimise sudden changes to operations, revenues and balance sheets, and balance the interests of incumbent market participants with the interests of consumers and new entrants through the transitional period.
The technical working group includes representatives from consumer groups, energy investors, large consumers, generators, transmission businesses, retailers, the Energy Security Board and market bodies. The group has also now expanded to include members of the ESB technical working group on the post 2025 market design process.
Anyone who would like to meet with AEMC staff to discuss the technical working group and the issues and questions raised can contact Russell Pendlebury.
Media: Kellie Bisset, Media and Content Manager, 0438 490 041 or (02) 8296 7813