{{item.videoDuration}}
{{item.title}}
{{item.text}}
{{item.videoDuration}}
{{item.title}}
{{item.text}}
The challenge of connecting a high volume of new projects in an increasingly constrained network is driven by various factors. Inconsistency and inefficiencies in the existing process, and ineffective collaboration between generators, developers, network service providers and industry bodies, create delays and complexity in the connection process. The Connections Reform Initiative (CRI), collaboratively established by the Clean Energy Council and AEMO, was created to help overcome these challenges and connect new generators to the grid faster. While the CRI is focused on initiating a suite of reforms, its rule change submission focused on improving investor certainty for assets passing through the registration stage of the connection process. This has resulted in the Australian Energy Market Commission (AEMC)’s recent rule change, amending the R1 process.
What will the rule change do?
The Enhancing investment certainty in the R1 process final rule seeks to reform the R1 process, when connection applicants must demonstrate their plant is capable of meeting or exceeding its performance standards, in order to become a registered participant in the NEM. The final rule is effective from 11 July 2024, however any R1 processes currently underway will not be impacted by the final rule. Figure 1 outlines the key features of the rule change, aimed at improving investment certainty by addressing several gaps and hindrances to timely connections.
Figure 1: Summary of rule change
Source: PwC, adapted from AEMC’s rule determination.
The rule change seeks to increase transparency, communication and predictability in the R1 process
Connecting parties considered a lack of formal obligations under the National Electricity Rules (NER) was contributing to poor engagement and process delays. While AEMO noted that a range of factors could contribute to process delays, including rushed design or poor-quality models and data, it acknowledged that prescription in the NER could improve transparency and consistency for connection proponents. As such, the final rule imposes obligations on AEMO to provide timely notifications to connecting parties. This includes:
- Within 5 business days of receiving a R1 package submission, AEMO must provide connection applicants with written acknowledgement of receipt or provide details of how the application is non-conformant with the R1 assessment guideline
- Within 60 business days of receiving a R1 package, AEMO must notify connection applicants of the status of the R1 assessment
- Within 5 business days of the completion of a R1 assessment, AEMO must notify the connection applicant that the assessment is complete and whether AEMO will register (or conditionally register) the applicant’s generator.
Figure 2: Prescribed timeframes for R1 connection process
Source: PwC, adapted from AEMC’s rule determination.
In making this change, the AEMC did not intend the timeframe to add additional burden to existing AEMO or NSP practices. Importantly, the 60 business day timeframe specified does not impose a requirement to make a decision within this period but simply to advise the applicant as to the status of the process. The AEMC was of the view that existing practices already comply with these timeframes. Noting this, the formalisation of timeframes for communication is not intended to speed up these interactions but instead to provide predictability and certainty around when communications and/or information requests from AEMO can be expected by connection applicants.
Faster connections may however be facilitated by greater transparency in the review process. The final rule changes specifies that AEMO and NSPs need to provide written reasons when requesting additional data and information from connection applicants. If it still unclear, the connection applicant is also able to request additional information. This will help to take the guess-work out of the process, and make any re-modelling or provision of additional information more streamlined and efficient, as issues can be more easily identified and remedied by the connection applicant.
The rule change takes a pragmatic approach to revising performance standards
Previously, a requirement in the NER for standards to be ‘no less onerous’ meant that connecting plants were prevented from proposing any adjustments to standards that were lower than existing standards. The AEMC considered this was a key source of engineering overwork and connection delays.
The final rule change relaxes this requirement, allowing connection applicants to revise their standards more flexibly and removing the ‘no less onerous’ requirement where a standard is above the minimum access standard. This change provides flexibility to allow pragmatic revisions to apply, where the end result is immaterial to achieving the overall minimum access standard. This avoids any unnecessary restriction in the renegotiation of standards and is intended to streamline the R1 process. For example, this rule change may streamline the process for battery retrofits for existing solar or wind farms (where the battery is proposed to share a common connection point and performance standards with the existing generator).
The ‘no less onerous’ requirement still exists when renegotiating a standard that is below the minimum access standard, however upon joint agreement by AEMO and the NSP, an applicant may propose a less onerous standard. This is envisaged to support alterations to legacy plant, which may benefit the power system but would otherwise reduce standards below the prescribed level. Noting that this type of alteration should not be unnecessarily prevented, the proviso to allow reductions where there is joint agreement between AEMO and NSPs allows engineering judgement to prevail over the NER in certain situations.
The rule change shifts some of the burden to AEMO and NSPs, who have greater access to information
To avoid duplicate assessments by NSPs and AEMO and prevent misalignment between these two parties, the final rule change requires that AEMO and NSPs must consult with each other during the R1 assessment process. A ‘reasonable endeavours’ obligation to share data and information is also imposed on these parties. For example, it is expected that NSPs will share the results of their assessments and network models with AEMO. Similarly, AEMO should share information from its NEM-wide PSCAD model with the NSP and provide advice to NSPs throughout the process.
These obligations are intended to ensure all parties are well-informed throughout the R1 process and to eliminate information asymmetries. Collaboration and cooperation between NSPs, AEMO and connection applicants is critical to ensuring a streamlined connections process, and will be better supported by the introduction of these new roles and responsibilities for the assessing parties.
What still needs to occur to facilitate timely connections?
It is important to acknowledge that the R1 process does not occur in a silo and successful execution of the connections process is multi-faceted. While these changes to the registration process are a step in the right direction, other key issues remain outstanding.
References:
1 The AEMC notes as at March 2024, there were 593 projects in the connections queue.
2 AEMO, 2024 Integrated System Plan for the National Electricity Market, June 2024, p. 11.
{{filterContent.facetedTitle}}
{{contentList.dataService.numberHits}} {{contentList.dataService.numberHits == 1 ? 'result' : 'results'}}
{{contentList.loadingText}}
{{contentList.loadingText}}
Contact us
Follow PwC Australia
