The Australian Energy Regulator (AER) has released final guidance on applying a value of emissions reduction.
Energy Ministers were responsible for developing the methodology for an interim Value of Emissions Reduction (VER) ahead of an ongoing VER being developed.
The AER’s role is to provide guidance about how to adopt the methodology in regulatory processes like regulatory investment tests (RIT) and regulatory determinations under the National Electricity Law.
Our final guidance includes a table of interim values of emissions reduction derived from the method that we will use in carrying out our regulatory functions, and that network businesses should use in their proposals.
Our final guidance maintains consistency with the Australian Energy Market Operator’s Integrated System Plan methodology. This allows RIT proponents to comply with our existing network planning guidelines while incorporating the value of emissions reduction.
Following stakeholder feedback, the final guidance clarifies several issues including the application of the VER and how our guidance aligns with the Integrated System Plan.
We recently commenced consultation with stakeholders on the Cost Benefit Analysis and RIT application guidelines, and we will shortly commence a review of the Expenditure Forecast Assessment Guidelines. The AER intends to provide more detailed guidance on how to incorporate the value of emissions reduction in these Guidelines. The consultation processes on amending the Guidelines will provide stakeholders with opportunities to engage more deeply on how valuing emissions reduction is implemented. We will update our VER guidance if required, to maintain alignment following the review of these Guidelines.