In recognition of the critical role communities play in getting to net zero, the Australian Energy Market Commission (AEMC) has recommended the national framework provide greater clarity around social licence.
The recommendation is among several outlined in a final report on Stage 2 of a review into whether the regulatory framework is flexible enough to enable the timely and efficient delivery of major transmission projects needed to move to net zero.
AEMC Chair, Anna Collyer says as Australia’s ageing coal-fired generation is retired, the scale of the physical build of transmission infrastructure to deliver power from renewable generation to consumers will have an impact on communities.
“Social licence is a term that is used a lot when we talk about infrastructure delivery, but behind the term are individuals and communities that must be brought along at every step of the way," Ms Collyer said.
“We need to minimise the impacts and maximise the benefits for the people and places that host these essential pieces of the energy transition puzzle.”
The Commission considers there are several opportunities for additional guidance to be provided in the Rules and by the Australian Energy Regulator (AER), to assist in social licence being obtained and maintained. They include:
- Cost recovery - that the AER provides additional guidance to stakeholders regarding how the costs associated with building and maintaining social licence for major transmission projects be considered and assessed as part of the regulatory process.
- Engagement - that the AER provides additional guidance to stakeholders around its expectations of transmission network service providers (TNSPs) regarding engagement and consultation with local communities affected by major transmission projects at key stages of the planning process.
The Commission also recommends changes be made to the national electricity rules (NER) to ensure the expectations on TNSPs to engage and consult local communities at key points in the planning process are consistent for all transmission projects identified through the ISP.
Anna Collyer said additional guidance would clarify the arrangements that support TNSPs in carrying out activities that build and maintain community acceptance of major transmission projects.
“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,” Ms Collyer said.
“TNSPs should continue to actively invest in social licence activities as it is vitally important to enabling the energy transformation.”
The AEMC’s final recommendations are designed to help manage uncertainty in the delivery of the large-energy transmission infrastructure that will be required to unlock gigawatts of renewable energy.
In looking at potential reform of the planning and investment process in transmission, the risk of ‘financeability’ challenges is addressed, by recommending more flexibility be provided in the electricity rules.
‘Financeability’ refers to making investment financially viable in a way that is also beneficial for energy consumers.
To enable this flexibility, the Commission's final recommendation 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.
Anna Collyer said this flexibility should provide both investors and consumers with confidence.
“When it comes to transmission, it is critical the right balance is struck between the need to get the right projects built while ensuring customers don’t overpay because the wrong projects get built, or the costs of building the right projects have been under egged,” Ms Collyer said.
The report also includes recommendations that would improve clarity on the cost recovery of different types of planning activities in addition to improving the workability of the feedback loop.
A public forum will be held on 03 November which will provide an overview of the final recommendations in the report. Interested stakeholders can register for the forum here.
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