The Australian Energy Market Commission (AEMC) has announced that it will review how the planning, investment and economic assessment processes for large-scale transmission infrastructure can support a renewable energy future.

AEMC chair Anna Collyer says that in order to support the continued energy transition, there will need to be an investment of a scale not seen in a generation.

“The regulatory framework will need to help ensure this happens in the most timely and efficient way,” she says.

“Consumers will be paying for these projects for many years to come, so we will need to make sure they are delivered in the most efficient way possible with robust consumer protections in place.”

The review will be conducted in two stages, the first to identify and test issues with the frameworks for planning, investing and delivering large transmission projects and the second, to develop solutions to issues identified during stage one of the review.

A consultation paper released today has opened the discussion to consider issues such as:

• Whether transmission network service providers’ existing rights to build large-scale transmission projects should be accompanied by obligations to build
• How factors like carbon emissions and wider economic benefits should be treated in assessing the potential costs and benefits of major transmission projects
• Whether providing large-scale transmission projects should be open to competition.

Several working groups representing energy market bodies, government and investors have been established to provide advice and feedback during the review. The views of consumer groups and a wide range of stakeholders will be critical and there will be a range of opportunities to provide feedback, such as through public workshops and forums to gather feedback and discussion papers on issues raised by stakeholders. The first stage is due for completion by the end of 2021.

At the same time, as part of a related rule change request, the AEMC is looking at whether the regulatory investment test for projects needs to be revisited in the event of large cost increases following completion of the test.

This rule change request was submitted by the Energy Users Association of Australia, Delta Electricity, Major Energy Users Inc., ERM Power (now Shell Energy Operations Pty Ltd) and AGL Energy. It proposes to require transmission and distribution project proponents to reapply the regulatory investment test if the cost of a proposed project materially increases following completion of the test.

This rule change request is being considered as part of the consultation process for the Transmission Review because the issues both involve managing uncertainty in transmission project planning and investment.

The Review will not consider the issues raised in the recent rule change determination in relation to the financeability of large-scale transmission projects, but will consider whether insights can be gained in relation to financing large infrastructure projects in other sectors. We will also continue to work closely with the AER to assess the relevance of any issues raised during the review of its rate of return instrument.

Stakeholders are invited to make submissions on both the review and the rule change request by 30 September 2021. A public forum will be held on 2 September 2021 to discuss the review and rule change request.