In December 2018, in its inaugural Coordination of generation and transmission investment review (CoGaTI), the AEMC made recommendations for:
- reform to the way generators access and use the transmission network; and
- a review of the charging arrangements which enable transmission businesses to recover the costs of building and maintaining transmission infrastructure, both within and between regions.
That same month, the Energy Security Board (ESB) made a recommendation in its Integrated System Plan: Action Plan report to the COAG Energy Council that congestion and access issues be considered in 2019, and options developed for how to address them.
Consultation paper
In March 2019, the AEMC published a consultation paper to commence the ‘CoGaTI implementation – access and charging review’, which progresses the above recommendations. The consultation paper sought stakeholder feedback on principles and issues surrounding reform to the current access and charging arrangements, including in relation to sequence and timing. To facilitate this consideration, the AEMC presented options for access and charging reform, including:
- introduction of dynamic pricing regions in the National Electricity Market (NEM) in order to better reflect the real-time cost of network congestion;
- changes to allow generators to underwrite a greater proportion of transmission costs in exchange for firm transmission rights; and
- changes to intra-regional TUOS allocation.
In April 2019, the AEMC released a supplementary information paper that provided further information and context about the need for access and charging reform.
The AER provided its submission on 26 April 2019.
Directions paper
In June 2019, the AEMC published a directions paper that progresses the review’s consideration of reform to the transmission access framework. In its directions paper, the AEMC presented a framework for access reform, which it has developed based on feedback from stakeholders to the consultation paper and from meetings of the review’s technical working group.
The AEMC’s proposed framework comprises the above mentioned introduction of dynamic pricing regions in the NEM, concurrent with the introduction of transmission hedge products for purchase in the wholesale electricity market. These products would allow market participants to hedge against the differences in wholesale electricity prices that are expected to arise under the new wholesale electricity pricing framework.
In the directions paper, the AEMC sought stakeholder feedback on design aspects of this proposed framework. It also sought stakeholder feedback on the concept of having transmission planning influenced by generators’ purchase of transmission hedges, and the potential for a portion of transmission costs to be collected from generators from these purchases.
The AER provided its submission on 2 August 2019.
Discussion papers
In October 2019, the AEMC progressed consideration of the proposed access reforms with the publication of two discussion papers:
- The COGATI proposed access model discussion paper set out an internally consistent design of the proposed transmission access model. This aimed to assist stakeholders to consider the reform framework in its entirety and comment on the interrelated aspects of the design. The paper also set out the AEMC’s proposed approach for quantitative modelling to evaluate the impacts of the reform and to inform specific policy design decisions.
- The Renewable Energy Zone (REZ) discussion paper sought to provide stakeholders with clarity as to the different ways that REZs can be characterised and facilitated.
In providing stakeholders with a design of the proposed transmission access framework, the AEMC progressed consideration of the implementation of dynamic pricing regions in the NEM, together with the introduction of Financial Transmission Rights for market participants to manage their risk. In the proposed access model discussion paper, the AEMC sought stakeholder feedback on the framework’s design, as well as its proposed approach to modelling. The AEMC also communicated that, based on stakeholder feedback, it would not be progressing the proposal for transmission planning to be influenced by generators’ purchase of transmission hedges.
In the separate REZ discussion paper, the AEMC focussed on transmission access issues that are specific to facilitating REZs, which it considered as being a first step on the path to holistic access reform. The AEMC sought stakeholder feedback on its characterisation of the issues and its proposed REZ model.
The AER provided a submission to each paper on 12 November 2019.
By way of update, in its Update Paper released in March 2020 the AEMC advised that the ESB has been tasked by the COAG Energy Council to provide interim advice on options to implement REZs. The AEMC’s prior work on REZs is feeding into this ESB work.
Interim report
In March 2020, the COAG Energy Council tasked the AEMC with continuing its development of the ‘Transmission Access Reform’ model through the ESB’s post-2025 market design process. The post-2025 market design incorporates seven different market design initiatives. Transmission access and coordination of generation and transmission investment is one of these, with the AEMC taking the lead on this work stream.
On 7 September 2020, the AEMC published an Interim Report on Transmission Access Reform that set out updated technical specifications of the proposed access model, to ensure the core features of locational marginal pricing (dynamic pricing regions) and Financial Transmission Rights are fit for purpose for the NEM. The updated design of the model, including its implementation, reflected significant stakeholder input over the preceding months. The Interim Report also set out an overview of, and was accompanied by, the following consultant reports:
- The NERA Economic Consulting report on its Cost Benefit Analysis of Access Reform, which provides an in depth analysis of NERA’s bottom-up modelling of the benefits of implementing the reform in the NEM.
- The HARD Software report, which provides preliminary indications of the costs of implementing the reform.
The AER provided its submission to the AEMC’s Interim Report on 16 October 2020.
AER - Submission to AEMC interim report - Transmission access reform - 16 October 2020
More information
Find out more about the AEMC market review on Coordination of generation and transmission investment implementation – access and charging.