On 30 September the Australian Energy Market Commission (AEMC) delivered its final report and recommendations on its Transmission access reform review (this review) to Ministers.  

This Review began in late 2023, when Ministers agreed that the AEMC should continue the Energy Security Board’s (ESB) and Energy Advisory Panel’s (EAP) work on transmission access reform that sought to improve locational signals in the market over investment and operational timeframes.

In its final report, the AEMC recommended against implementing a particular access reform model that was initially proposed by stakeholders: the hybrid model which combines a priority access arrangements with a congestion relief market (CRM).  

The AEMC considers the hybrid model would not have delivered sufficient benefit to outweigh the cost and complexity of implementation.  

Specifically:

• The benefits from priority access to improve investment efficiency over and above what can be achieved through jurisdictional schemes (such as jurisdictional Renewable Energy Zones (REZs) and other government schemes that underpin energy infrastructure), if delivered effectively, would likely be marginal
• The Congestion Relief Market (CRM) model has the potential to improve operational efficiency but is complex and contains several design compromises. This creates uncertainty about whether the potential benefits of the CRM for operational efficiency would materialise and outweigh the costs of implementation.

This recommendation was in the broader context, scale and speed of the transformation of the NEM that lies ahead.  

Ministers noted the AEMC's recommendation not to implement the hybrid model at their December Energy and Climate Change Ministerial Council meeting (ECMC).

Government policies to coordinate generation and transmission investment can support efficient investment in the NEM

Since the ESB commenced work on the hybrid model, NEM jurisdictions have introduced policies and schemes to coordinate and, in some cases, underpin investment in renewable energy and transmission infrastructure in identified locations to drive emissions reductions.  

These schemes provide locational signals, investment certainty, and in the case of REZs, a level of access protection that is absent from the open access, regional pricing arrangements in the national framework.  

In the absence of reforms to national access and pricing arrangements, it is even more important these schemes are delivered efficiently and effectively so that consumers benefit. The AEMC has recommended measures to support the delivery of jurisdictional schemes.  

Context of the review

Access and pricing arrangements are fundamental components of the NEM regulatory framework and aim to signal where plant should locate and how plant should operate, such that network infrastructure is used efficiently and consumers do not pay more than necessary to have electricity.  

The combination of the NEM’s “open access and regional pricing” arrangements, along with the market arrangements to determine dispatch when there is congestion can lead to dispatch and investment inefficiencies. Because of this, access and pricing arrangements have long been the subject of discussion in the NEM, with a range of alternatives put forward over the years.

The AEMC’s Transmission access reform review is the latest iteration of access and pricing reform discussions. It began in late 2023, when Ministers agreed that the AEMC should continue the ESB and EAP’s work on transmission access reform that sought to improve locational signals in the market over investment and operational timeframes.

Specifically, Ministers asked the AEMC to continue to develop a particular access reform model that was proposed by stakeholders: the hybrid model which combines a priority access model with a congestion relief market (CRM) model. The hybrid model was seen as a potential way of sending stronger locational signals to achieve efficiency benefits in both investment and operational timeframes, while also addressing key stakeholder concerns.

The ESB’s work on the hybrid model was aimed at achieving the four reform objectives that were developed by the ESB in consultation with stakeholders and agreed on by Energy Ministers.

1.  Investment efficiency: Better long-term signals for market participants to locate in areas where they can provide the most benefit to consumers, taking into account the impact on overall congestion.
2. Manage access risk: Establish a level playing field that balances investor risk with the continued promotion of new entry that contributes to effective competition in the long-term interests of consumers. 
3. Operational efficiency: Remove incentives for non cost reflective bidding to promote better use of the network in operational timeframes, resulting in more efficient dispatch outcomes and lower costs for consumers.
4. Incentivise congestion relief: Create incentives for demand side and two-way technologies to locate where they are needed most and operate in ways that benefit the broader system.

The hybrid model formed the basis of the AEMC’s work in this review. The review was done in close collaboration with in collaboration with the Australian Energy Regulator (AER) and the Australian Energy Market Operator (AEMO), governments and stakeholders.

The AEMC designed what it considers is the preferred version of the hybrid model, taking on board stakeholder feedback. This version is summarised in volume 1 of the final report, with details on the design of the hybrid model provided in volume 2.  

The AEMC ultimately recommended against the implementation of the hybrid model for reasons outlined in the report.

Stakeholder engagement

Publication of the consultation paper

On 24 April 2024, AEMC published a consultation paper outlining various design options for a transmission access reform hybrid model Stakeholder feedback to the consultation paper was due on 6 June 2024. 39 Submissions were received from a variety of stakeholders.  

Technical working group (TWG)

• The AEMC established a technical working group comprised of diverse stakeholder representatives to assist in the review process. A member list and past meeting summaries are published below.  

Public Forum

• The AEMC held a public forum on 18 July 2024 to seek stakeholder feedback on key questions in the transmission access reform project plan. The meeting slides, a summary of the public forum and ACIL Allen’s final advice have been published below.