Transmission investment in Western Victoria could lead to $300 million benefits

The AEMC has proposed reforms to the current way generators access and pay for transmission infrastructure.

The proposed reforms would: 

  • Give new connecting generators more certainty around getting their energy into the grid and delivered to consumers
  • Reduce the costs and risks for consumers when it comes to building and funding new transmission infrastructure

The AEMC is working with the Energy Security Board, AEMO and the AER to develop a framework to underpin an orderly power system transition under a range of future scenarios as described in the market operator’s integrated system plan within the ISP timeframe.

On 8 July 2019 the AEMC held a public forum to discuss the reforms needed to deliver new generation and transmission to underpin our future power system.

The power system, once made up of a small number of large, centrally located generators, is now made up of a large number of smaller, more dispersed generators. Such significant change to the shape of the power system means the way transmission and generation are planned and paid for must also change. 

The AEMC’s public forum, focused on proposals set out in a directions paper published in July 2019 as part of its Coordination of generation and transmission – access and charging review, was well attended by representatives from across the energy sector including market participants, consumer groups, investor bodies and market and regulatory institutions. 

AEMC Commissioner Charles Popple said that reform was needed now “so we can transition to a new and lower emissions power system in the most cost effective way for consumers without imposing delays”.

This will also improve investment certainty and guide new investment in transmission infrastructure so it meets the needs of consumers and the power system.

The view provided by the vast majority of the majority of stakeholders at the forum was that reform is needed and that Australia needs to start somewhere – even if the reforms are complex. 

Key points raised by stakeholders include that the Commission should:

  • Place a large weight on simplicity 
  • Focus on promoting contract market liquidity 
  • Design transmission hedges that are fit for purpose no matter what type of generation technology 
  • Articulate a clear plan for transition and implementation to provide clear guidance for the market 

Stakeholders brainstormed options for the design of transmission hedges. Market participants and finance institutions offered valuable insight on the types of access products that would help them manage risk and access finance. Government and regulatory bodies offered their experience in how regulatory frameworks can be designed to deliver desired outcomes. 

For example, it was noted that transmission hedges would be most useful if they could:

  • Be offered for a range of durations (say, three years to 20 years)
  • Align with the different generation technology types (e.g. a solar peak product)
  • Be purchased both within a region and between regions

The Commission is seeking stakeholder views on the issues raised in the directions paper and during the public forum. Submissions on the directions paper are due by 2 August 2019.

Stakeholder views will help inform the COGATI draft report, which will be published in September 2019.

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