The proposed reforms are designed to provide greater clarity to investors about where new renewable generation and storage projects should be located.
The Australian Energy Market Commission (AEMC) has published a consultation paper proposing improvements to the way congestion is managed in the national electricity market (NEM), designed to help to keep system costs down for consumers and support jurisdictional renewable energy zones.
The policy is set out in a consultation paper for stakeholder feedback, following a request by energy ministers to carry on the work of the former Energy Security Board (ESB) in progressing the detailed design of transmission access reform.
AEMC Chair, Anna Collyer, said the hybrid model approach to transmission access reform – initially proposed by stakeholders – is designed to address the challenges posed by the rapid growth of renewable energy and storage projects in the NEM.
”By 2050, the Australian Energy Market Operator (AEMO) forecasts a seven-fold increase in grid-scale wind and solar capacity and a 19-fold increase in storage capacity.
“As we transition towards a weather-dependent energy system and implement initiatives such as renewable energy zones, the Capacity Investment Scheme and Rewiring the Nation, it is crucial to carefully manage congestion to minimise the costs of the transition.
“Our proposed reforms aim to ensure that the right projects are built in the right locations, generating at the right times, benefiting both industry and household consumers.
‘’Currently, access arrangements in the NEM are not well suited to a future grid dominated by variable renewables and storage.
‘’The arrangements are not designed to support the efficient management of congestion in operational timeframes, and, in investment timeframes they contribute to inefficiency and risk due to cannibalisation. This occurs when a new entrant displaces pre-existing generators instead of adding usable new electricity generation to the power system.
”Without reforms to transmission access these risks and inefficiencies will increase as the transition to net zero progresses, increasing costs to consumers,” Ms Collyer said.
The AEMC’s hybrid model builds on reform work carried out by the ESB in consultation with investors, renewable developers, consumer groups and other stakeholders.
The model has two components:
- Priority access: Protecting generators from being “cannibalised” by providing priority access in investment timeframes, offering greater certainty on dispatch outcomes over the life of the asset
- Voluntary congestion relief market: Allowing generators and storage to be rewarded for managing congestion in real-time
By integrating these components, the proposed reform aims to improve both operational efficiency and investment efficiency as well as managing access risk and incentivising congestion relief.
The AEMC invites stakeholders to provide feedback on the consultation paper by Thursday 6 June, 2024. The AEMC will consider all submissions in developing its final recommendations to energy ministers to support the efficient and cost-effective transition to a renewable energy future.
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