Market Review: Completed
Overview
The Australian Energy Market Commission (AEMC) has made final recommendations to improve the regulatory frameworks for transmission investment and planning to support efficient investment in and timely delivery of major transmission projects.
The AEMC published a final report as part of Stage 3 of the Transmission planning and investment review on 4 May 2023. The Stage 3 final report concludes the Review.
The Commission recommends changes to improve the regulatory process for transmission projects identified in the Australian Energy Market Operator’s (AEMO’s) Integrated System Plan (ISP) in three key areas:
- Economic assessment process: encouraging transmission network service providers to undertake more planning activities earlier in the economic assessment process and considering further opportunities for improvement in the upcoming ISP review.
- Treatment of emissions reduction: harmonising the NER to be consistent with the intent of the national energy objectives once an emissions reduction objective is introduced.
- Application of the ex-ante regulatory framework: introducing a targeted ex post review mechanism for capital expenditure incurred on completed ISP projects.
The AEMC will host a virtual public forum on the Stage 3 final report
The Commission will hold a virtual public forum on 16 May 2023. The forum will set out the key findings and final recommendations of the Stage 3 final report. Stakeholders will have the opportunity to ask questions.
To register for this forum please visit our registration page.
The Stage 2 final report was published on 27 October 2022
The Stage 2 final recommendations sought to address uncertainty to support timely and efficient delivery of major transmission projects. The Commission had regard to stakeholder feedback when prioritising reform in four key areas:
- Financeability: Introducing greater flexibility to mitigate the foreseeable risk that financeability concerns may arise for ISP projects. A rule change process is underway. Please visit the project page for more information.
- Social licence: Providing greater clarity around social licence outcomes in the national framework. A rule change process is underway and the AER is developing additional guidance. Please visit the project page for more information.
- Planning activities: Improving certainty over the regulatory treatment of early works. Our Stage 3 final recommendations on the economic assessment process have extended our Stage 2 final recommendations on planning activities.
- AEMO’s feedback loop assessment: Improving workability of the feedback loop as a timely and effective consumer safeguard. We expect a rule change request later in 2023.
Work on contestability has been placed on hold
The AEMC published a directions paper as part of the contestability workstream of the Transmission planning and investment review on 24 November 2022.
The Commission has placed the contestability workstream of the Review on hold and will continue to monitor developments in the implementation of jurisdictional contestability regimes in New South Wales and Victoria, and overseas regimes, to understand and capture useful insights and information.
Background
Australia is undergoing a transformational shift to net zero emissions.
There is broad consensus that transmission is a critical enabler for the transition to net zero, both in the national electricity market and for the economy more broadly. This transition will require an unprecedented level of investment in, and build of, transmission infrastructure to deliver power from renewable generation and energy storage to consumers, and to deliver it quickly.
The scale of transmission investment required, coupled with the speed of the energy transition, presents unique opportunities and challenges for the existing regulatory framework.