Submission to AEMC Consultation on Harmonising energy rules with the amended national energy objectives

PIAC provided a response to the Australian Energy Market Commission’s (AEMC) consultation on Harmonising energy rules with the amended national energy objectives.

The consultation relates to updating the AEMC’s rules and processes in light of the Statutes Amendment (National Energy Laws) (Emissions Reduction Objectives) Bill 2023 currently before the South Australian Parliament. The Bill will add emissions reductions to the national energy objectives, to sit alongside the existing objectives of price, quality, safety, reliability, and security.

PIAC provided detailed advice on the National Electricity Rules and National Gas Rules clauses that will need to be updated to harmonise the rules with the amended objectives.

We also argued that while adding emissions reductions as a class of market benefit for the purpose of the planner, AEMO, developing the Integrated System Plan, and the regulator, the AER, making determinations on Regulated Investment Tests, is acceptable, doing so simplistically runs the risk of creating unintended effects. In particular, it is likely to inflate the benefits side of proposed network options, and so cause more network options to be approved and built than would otherwise be the case. This may not be efficient from the perspective of consumers’ interests, or with regard to emissions reductions. Instead, the change must be accompanied by more robust requirements for planners and project proponents to consider all credible options that meet an identified energy need. This should include non-network options, such as various forms of batteries, and demand side options, such as demand side management, or increased access to distributed energy resources.

We laid out principles for the design of the needed Value of Emissions Reduction metric, including that it:

• is set high enough to create meaningful emissions reductions;
• weights emissions reductions according to when they occur – with earlier reductions being valued higher than later ones; and
• is annually revised and adjusted to ensure that the emissions pathway remains viable to meet Australia’s commitments in terms of total allowable maximum emissions.