AEMC proposes to overhaul energy pricing and transmission

The COGATI (coordination of generation and transmission investment) seeks to redesign the market to ensure new energy generation and storage can find itself in the right place and at the right time for connecting to the grid. 

AEMC Chairman John Pierce said the increasing growth of dispersed renewable generation and batteries across the national electricity market (NEM) means comprehensive market reform is needed to integrate these new resources effectively. 

“At the same time we need to manage the transformation of the power system in ways that stop lower-cost generators being cut off congested networks – that can lead to unnecessary costs for consumers,” Pierce said. 

The paper sets out two key focusses for the AEMC: 

· Developing the specification of the proposed access model, which implements dynamic regional pricing and financial transmission rights 

· Facilitating renewable energy zones (REZs), which are a useful first step on the path to holistic access reform and can be implemented earlier.

The Model

The access model was set out in response to stakeholder feedback requesting a ‘working’ model for reform, as such a model would set a foundation upon which possible draft rule changes for reform could be proposed. 

“The proposals we are releasing today essentially do two things,” said Pierce, “they create better investment signals for generators to locate in more cost-effective places, and make it possible for them to use the transmission network efficiently.” 

Pierce went on to emphasise that these structural changes are “an essential element” if the Australian Energy Market Operator (AEMO) is going to be able to deliver its integrated system plan (ISP). 

“The ISP identifies what investment is needed to enable this to happen,” said Pierce, “COGATI complements this by reducing risk attached to new investment for consumers, generators, transmission networks and financiers.”  

These reports are timely for AEMO, which concluded its consultation process in August. The overwhelming theme of all the submissions, said AEMO’s final report, “was for AEMO to consider scenarios with stronger ambitions for emission abatement.” 

As the Investor Group on Climate Change (IGCC) pointed out in its own submission, all major NEM regions have committed themselves to achieve net zero emissions by 2050. 

 Pierce said proposed new rules would be prepared by the end of the year. If the energy ministers agree to the proposed changes, reforms could be implemented in coordination with the current ISP schedule.  

Renewable Energy Zones 

The facilitation of REZs is an attempt to regularise the concept of the ‘renewable energy zone’ in a framework as the concept remains somewhat ambiguous. The proposal sets out a way for generators to make a financial investment in a shared transmission network, a requisite for a definable REZ. 

The creation of these definable REZs would introduce locational investment signals to the market, enabling generators and investors to better invest and build large-scale renewable power stations and storage in places with the infrastructure or best potential for infrastructure in the grid’s future.

Submissions on both papers are due by 8 November 2019, with a public workshop to be held on 18 October 2019.