The Australian Energy Regulator (AER) has released draft guidance on applying a value of emissions reduction.
Energy Ministers were responsible for developing an interim Value of Emissions Reduction (VER) (or methodology) ahead of an ongoing VER being developed.
The AER’s role is to adopt the methodology for deriving values of emissions reduction and provide guidance about valuing emissions reductions in regulatory processes like regulatory investment tests (RIT) and regulatory determinations under the National Electricity Law.
The proposed new guidance adds no detail to when or how network businesses should undertake their calculations, compared with the previous guidance – it just provides the relevant figures they could use, when such calculations are made.
The purpose of our draft guidance is to provide stakeholders with an opportunity to comment on specific issues before issuing our final guidance which will bind the AER and RIT proponents to the method.
Our draft guidance also includes a table of interim values of emissions reduction derived from the method that we propose to use in our carrying out our regulatory functions, and that network businesses should use in their proposals.
Our draft guidance maintains consistency with the Australian Energy Market Operator’s (AEMO) Integrated System Plan (ISP) methodology. This allows RIT proponents to comply with our existing guidance related to using the assumptions and modelling approach in the ISP while incorporating the value of emissions reduction.
We seek stakeholder submissions by 18 April 2024, to NEOReforms
aer [dot] gov [dot] au (NEOReforms[at]aer[dot]gov[dot]au).
We will shortly commence consultation with stakeholders on the Cost Benefit Analysis and RIT application guidelines, as well as the Expenditure Forecast Assessment Guidelines, throughout 2024. The AER intends to provide more detailed guidance on how to incorporate the value of emissions reduction in these updated Guidelines. The consultation processes on amending the Guidelines will provide stakeholders with ample opportunity to engage deeply on how valuing emissions reduction is implemented.
Today, the Australian Energy Market Commission (AEMC) is publishing updated guidance for stakeholders on how it will consider the emissions reduction component of the national energy objectives when making rules and conducting reviews. All three energy market bodies (the AER, AEMC and AEMO) will, where relevant, use the same values of emissions reduction derived from the energy Ministers’ guidance.