AEMO report shows a need for greater transparency

A report released by the Australian Energy Market Operator (AEMO) shows the Large-scale Renewable Energy Target (LRET) will continue to be the main driver of generation investment to 2020.

The 2013 National Transmission Network Development Plan (NTNDP) considered the impact of changing dynamics in the National Electricity Market (NEM) in the next 25 years. It found the LRET and reductions in electricity consumption forecasts together result in generation plant retirements and, in some cases, a decrease in transmission asset utilisation.
The NTNDP modelling showed the carbon price has a lesser impact on investment.

Coal remains the dominant generation fuel in the outlook period. However, the changes in NEM dynamics could lead to an oversupply of up to 4000MW of electricity generation capacity, according to the report, which would further reduce the need for new large-scale generation investment.

The report also suggests investment in network augmentations is relatively small compared to investment in transmission asset refurbishment and replacement in the outlook period.

AEMO managing director and chief executive officer Matt Zema said the report highlighted a need for greater transparency of asset refurbishment and replacement decisions.

“Network augmentations that had been under investigation or already committed have been delayed or cancelled, and asset refurbishment and replacement will be the dominant investment driver. The NTNDP identifies network asset refurbishment and replacement as a planning priority compared to transmission network augmentations,” he said.

“Planners and investment decision-makers need to fully explore and consider the future need of those assets, as well as cost-effective non-network solutions, in evaluating the cost of refurbishment and replacement against the value of the service provided.”

The NTNDP also shows network prices will increase if electricity consumption continues to decline. According to the report, this is because network pricing is based on recovering the network asset value across a declining energy base, rather than on the service delivered by the network.

AEMO is pursuing a range of initiatives to enable efficient investment decision-making, including developing independent transmission connection point forecasts and identifying network investment needs for New South Wales and Tasmania. It is also reviewing projects under a new incentive scheme to improve usage of existing network assets.