The Australian Energy Market Commission (AEMC) has published a key part of its review into whether the regulatory framework is flexible enough to enable the timely and efficient delivery of major transmission projects needed to support the fundamental transformation of the energy market towards net zero.   
 
The AEMC’s draft recommendations are designed to help manage uncertainty in the delivery of large-scale energy transmission infrastructure in the near term. The work also aims to improve consumer and investor confidence in the regulatory framework. The review forms part of a larger body of work that will look at potential reform around the economic assessment process and contestability in transmission. 
 
A key recommendation of the Stage 2 draft report addresses the risk of financeability challenges by providing more flexibility in the electricity rules. To enable this flexibility, the Commission's draft proposal is for the Australian Energy Regulator (AER) to be given the explicit ability to vary the depreciation profile for actionable ISP projects. Actionable ISP projects are network investments that have been identified by AEMO as being critical to addressing cost, security, and reliability issues in the grid. The ability to vary the depreciation profile will enable cash flows to be tailored on a case-by-case basis if needed for particular projects.

AEMC Chair Anna Collyer said this flexibility should provide both investors and consumers with confidence.

“When it comes to transmission, it is critical we strike a balance between getting the right investment to achieve net zero and facilitating a reliable and secure future energy system, with delivering projects at the right time and as cost-effectively as possible to ensure the best outcomes for consumers,” Ms Collyer said. 

Building social licence is also an important issue and obtaining community acceptance of major transmission projects is essential for their timely and efficient delivery. The AEMC will continue to explore whether the regulatory framework creates any barriers to early stakeholder engagement. We will also examine whether cost recovery arrangements exclude certain social licence building activities. 

Ms Collyer said the AEMC will continue to seek feedback on how the electricity rules can improve community acceptance of major transmission projects. 

“Our journey to net zero requires the build-out of a huge amount of new renewable generation. To get this electricity to consumers, a considerable amount of investment in new transmission is required. The timely delivery of those projects will rely on community and public support,” Ms Collyer said.

Work by jurisdictional governments and the Australian Energy Infrastructure Commissioner in identifying key issues and promoting best practice actions remains critical to supporting the timely and efficient delivery of transmission projects. TNSPs should continue to actively invest in social licence activities as it is vitally important to enabling the energy transformation.  

The report also calls for greater clarity on the cost recovery of different types of planning activities which are vital to timely delivery and to improve the workability of the feedback loop. 
 
A public forum will be held on 23 June 2022 which will provide an overview of key findings and recommendations in the draft report. Interested stakeholders can register for the forum here.  
 
Stakeholders are invited to make submissions on the Stage 2 draft report by 14 July 2022. 
 
Visit the project page for more information and contact details.