Submission to the AEMC Coordination of Generation and Transmission Investment discussion paper

PIAC lodged a submission to the Australian Energy Market Commission’s (AEMC) discussion paper for its Coordination of Generation and Transmission Investment review. The review considers whether the current regulatory frameworks remain suitable given the transformation from a market dominated by centralised, fossil-fuelled generation meeting passive demand, to one where a far greater role will be played by decentralised, renewable generation and storage responding to more active and responsive demand. PIAC’s view is that the long-term interest of consumers is best served by managing this uncertainty through adaptable, long-term plans rather than relying heavily on narrow forecasts or overly prescriptive reforms.

As part of the energy transformation, many prospective generation proponents are looking to connect in areas which currently have limited network capacity if the network reaches the area at all. Experience has shown that the current regulatory framework is insufficient to fully realise the benefits of the coordinated connection of new generation. While it is preferable for these costs to be borne by generators or networks, there may be certain cases where it is in the long-term interests of consumers for some costs and risks to be socialised (i.e. borne by consumers) to facilitate the transition to a cleaner, more flexible energy system such as through a Renewable Energy Zone (REZ).

If costs are to be socialised, scrutiny and transparency is required to ensure that this does not simply provide a windfall gain to generation or transmission businesses. PIAC considers that the Australian Energy Market Operator (AEMO) as the National Transmission Planner and in developing the Integrated System Plan, should identify potential locations where it would be in the long-term interests of consumers. PIAC also puts forward comments on the five different options considered by the AEMC for how a REZ may be structured.

The treatment of storage is also a good example of the need for a more holistic solution which not only anticipates the transformation, but also encourages it in a way which minimises risk and maximises benefit. PIAC recommends a separate registration category for storage and hybrid facilities. The creation of a storage-specific registration category would allow a decision to be made about the network charging arrangements for storage facilities independent of any decision for generators.