Putting the Integrated System Plan into action

The AEMC today published a final report for its review on improving the coordination of investment in electricity generation and transmission to help protect consumers from paying too much.

A huge amount of generation will be built in the national electricity market in the coming years, taking the place of ageing coal-fired power. AEMO’s 2018 Integrated System Plan forecasts the overall transmission system requirements to connect these new generators over the next 20 years. 

AEMC Chief Executive Anne Pearson said today’s reform package is about delivering the right amount of new transmission infrastructure at the lowest cost to consumers.

“If we gold plate the transmission network, consumers pay too much. But if we don’t build enough, that also results in costs for consumers if they can’t get access to the cheapest electricity. So this is about building the right amount,” Mrs Pearson said. 

Transmission networks can be very expensive to build – running into many millions of dollars. Once built, consumers pay for them for decades. The AEMC’s report sets out the regulatory changes needed to deliver the Integrated System Plan in the required timeframe – and at the least cost.

“The changes we’ve set out in this report will embed the Integrated System Plan in the regulatory framework – so it can be put into action,” said Mrs Pearson.

AEMO, the system planner, provides a system-wide overview about what is needed, and when, in the Integrated System Plan. Transmission businesses, drawing on their local knowledge, then choose the best projects to deliver the plan. 

“Importantly, all proposed projects must undergo a rigorous cost-benefit assessment – known as a RIT-T – that includes considering if non-network solutions like demand response may be more efficient,” Mrs Pearson said.

In developing this reform package, the Commission looked at transmission charging arrangements, transmission planning arrangements, generator access arrangements, and the development of renewable energy zones as raised in the Finkel review.  

Key recommendations are:

• Directly linking investment decisions by transmission businesses to the Integrated System Plan, to speed up regulatory approval processes. 
• Streamlining the cost-benefit assessment (RIT-T) for new transmission by removing duplication from the process.
• Managing congestion so the cheapest power can get to consumers. This involves implementing phased reforms to change how generators access and use the network, starting with dynamic regional pricing.
• Allowing generators to pay for transmission infrastructure in exchange for access to it – which means generators can influence and have control over transmission planning decisions, leading to better coordination of generation and transmission investment.
• Facilitating renewable energy zones through generators’ funding of transmission infrastructure.
• Making it easier for large-scale storage systems to connect by creating a new registration category to support seamless integration.

The reforms would be implemented in stages to enable delivery of the Integrated System Plan in the timeframes identified by AEMO. The final stage of reforms would be completed in 2023.

The report has been provided to the COAG Energy Council for Ministers to consider.

Media: Prudence Anderson, Communication Director, 0404 821 935 or DL (02) 8296 7817.

Background on AEMO’s Integrated System Plan

AEMO’s Integrated System Plan, published in July 2018, sets out where and when network investment needs to happen to support the large amount of new generation connecting to the grid in the coming years. 

The COAG Energy Council has asked the Energy Security Board to work with the market bodies - the AEMC, AEMO and Australian Energy Regulator - to make the Integrated System Plan “actionable”. The AEMC’s report is part of that process – it sets out the “nuts and bolts” of how to deliver the Integrated System Plan.

The report has been developed in consultation with stakeholders and underpins the Energy Security Board’s vision for making the Integrated System Plan actionable. 

This work is part of the AEMC’s System security and reliability program.

See also terms of reference from the COAG Energy Council.