11 May 2021 Department of Planning, Industry and Environment NSW Electricity Infrastructure Roadmap Tranche Two Regulations Issues Paper
11 May 2021 Department of Planning, Industry and Environment
NSW Electricity Infrastructure Roadmap
Tranche Two Regulations Issues Paper
Department of Planning, Industry and Environment
Webinar objectives
• Provide an overview of Roadmap and Tranche 2
regulations issues paper
o Explain the policy intent of specific elements
o Outline issues, to help inform implementation
• Opportunity to clarify aspects of the issues paper
content, to support submissions
Agenda
1. Welcome and acknowledgement of country
2. Introduction to the Roadmap
3. Overview: regulation development, timeframes
4. Tranche Two Issues Paper
• Energy Security Target
• Electricity Infrastructure Investment
Safeguard
• Classification of Renewable Energy Zone
(REZ) network infrastructure
• Compliance and enforcement of offences
5. Next steps
Webinar objectives and agenda
Acknowledgement of Country
We acknowledge that today we meet on many Aboriginal lands.
We acknowledge the traditional custodians of the lands and we show our respect for elders past, present and emerging through thoughtful and collaborative approaches to our work.
Nikita Ridgeway
Department of Planning, Industry and Environment
The Roadmap coordinates investment in
transmission, generation, storage and firming
infrastructure to replace aging power stations
The Roadmap includes actions that will work
together to deliver ‘whole-of-system’ benefits:
• Renewable Energy Zones
• Transmission Development Scheme
• Electricity Infrastructure Investment Safeguard
• Pumped Hydro Recoverable Grants Program
• Internationally competitive NSW industries
What is the Electricity Infrastructure Roadmap?
Storage
Transmission
REZ
generation
Increased price spread so storage can buy low and sell high
Decreased curtailment and ‘firmed’ variable
resources
Department of Planning, Industry and Environment
Forecast $130 a year saving on an
average household electricity bill and
$430 a year saving on an average
small business electricity bill from 2023
to 2040
$32 billion in regional energy
infrastructure investment expected to
2030
12 gigawatts in new generation and
2 gigawatts of long duration storage
by 2030
90 million tonnes of reduced carbon
emissions to 2030
What will the Roadmap deliver?
…and other benefits to regional NSW
Department of Planning, Industry and Environment
6,300 construction jobs and 2,800
ongoing jobs expected in 2030, mostly
in regional NSW
Up to $265 million in community
enhancement funds to host
communities by 2042
$1.5 billion in lease payments
estimated by 2042 to landholders
hosting new infrastructure
Improved competitiveness of regional
energy intensive industries
Benefits of co-locating agriculture and
renewables
What will the Roadmap deliver for our regions?
“Grazing of sheep, of the appropriate breed, and solar
farming can co-exist without a problem whatsoever, and with
a net benefit overall to the community and also to the owner
of the land and the owner of the sheep. It’s a win-win. An
absolute win-win.”
- Tom Warren, sheep farmer in Dubbo, NSW
Department of Planning, Industry and Environment
Our current infrastructure took 30 years to build. We
need to replace it in less than 15 years.
If the investment comes too late, NSW consumers
face much higher electricity prices.
Why did we release the Roadmap?
Pumped hydro
takes about 8 years
to commission
Renewable energy
zones take up to 10
years to
commission
Department of Planning, Industry and Environment
Overview of regulation development
Electricity Infrastructure
Investment Act 2020 (EII Act)
Tranche 1
Renewable Energy Sector Board
Tranche 2
Matters which are urgent or mechanical
Tranche 3
Matters requiring further policy development
we are here
Department of Planning, Industry and Environment
Overview of different tranches of regulation
Department of Planning, Industry and Environment
Indicative timeline
Department of Planning, Industry and Environment
Energy Security Target
Liam Ryan, Executive Director, Strategy and Implementation
Department of Planning, Industry and Environment
Definition of reserve margin
• Buffer to meet forecast maximum demand + loss
of two largest generating units
• Current largest scheduled units are Mount Piper –
705MW, Eraring – 680MW
• Future renewable projects may form NSW’s
largest units
➢ No regulations recommended on this currently.
Potential to recommend regulations in future
Calculating maximum demand
• Defined as POE10 forecast methodology
• Regulations can prescribe: factors to be
considered in calculating maximum demand;
method of calculating maximum demand
➢ Calculation to be based on AEMO’s most recent
forecast of maximum summer operational
demand. Demand ‘as generated’ to align with
definition of firm capacity (next slide)
Energy Security Target
Energy Security Target
= Maximum Demand + Reserve Margin
Department of Planning, Industry and Environment
Definition of firm capacity
• Defined as capacity expected to be available at
times of peak demand
➢ Proposal is to prescribe
• summer scheduled capacities of Scheduled
Generators
• summer scheduled capacities of Semi-
Scheduled Generators (e.g. wind and solar)
multiplied by a derating factor
• nominal capacities of interconnectors
• forecast demand response capacity (i.e. not
including the AEMO RERT program).
Energy Security Target: question 1
Question 1: Should the Energy Security Target
Monitor define the method to determine the derating
factor or should the method be defined in the
regulations?
If not by derating factors, how else should the
regulations address the probabilistic nature of semi-
scheduled generators in the context of the
deterministic Energy Security Target?
Options for derating factor
• preferred option is 10th percentile capacity
available during the trading intervals with the
highest 0.1% of operational demand over the
past three financial years.
• alternative is to provide principles to consider
when developing a derating factor.
Department of Planning, Industry and Environment
Energy Security Target Monitor report
• Monitor to report annually to Minister
• Must include forecast Energy Security Targets and
firm capacities for 10 FY’s
• Must consult with Department and AEMO
• Report to be published (sensitive information to be
redacted)
➢ No regulations are proposed. Monitor should
maintain discretion to include other information in
reports if it considers relevant.
Energy Security Target: question 2
Question 2: Should the regulations prescribe any
other matters for inclusion in the Energy Security
Target Monitor’s report? If so, what are they?
Department of Planning, Industry and Environment
Energy Security Target: clarifying questions
Department of Planning, Industry and Environment
Electricity Infrastructure Investment
SafeguardMelanie Koerner, Lead, System Planning, Reporting & Engagement, Consumer
Trustee Establishment Team
Department of Planning, Industry and Environment
The safeguard prescribes three types of
infrastructure, each with different objectives
1. Generation
o To minimise electricity costs for NSW consumers
o Renewable energy over 30MW
2. Long duration storage
o To meet the reliability standard
o +8 hours storage
o Scheduled in the NEM’s central dispatch process
3. Firming infrastructure
o To meet the Energy Security Target (EST) and
the reliability standard
o Scheduled in the NEM’s central dispatch process
Part 6 of the EII Act establishes the Safeguard: a framework to ensure orderly and
efficient investment to meet the needs of the electricity system
The legislation also sets minimum objectives
to be met by 31 Dec 2029
• Construction of generation infrastructure with annual output equivalent to
° 8 GW in the New England REZ
° 3 GW in the Central West Orana REZ
° Additional 1 GW of generation capacity
° Generation infrastructure can be located outside NE and CWO REZs as long as they produce an equivalent amount of energy
• Construction of long duration storage infrastructure with 2 GW capacity
• Committed projects as at 14 November 2019 do not count towards these objectives (including Snowy 2.0)
Sensitive: NSW Government
18
Elements of the Infrastructure Safeguard
20 Year Development
Pathway
10 Year Tender Plan
Competitive Tenders
SFV Contract Management
Risk Management
Contracts
Monitoring, Annual Report
Operationalised via
LTESA terms
and conditionsTender rules
Informs
Informs
Operationalised via Gives rise to May give rise to Informs
Department of Planning, Industry and Environment
Reliability standard
• Legislated objective for long-duration storage and
firming infrastructure is to meet the ‘reliability
standard’
• Defined as the reliability standard implemented by
AEMO under the NER
• Regulations can supplement definition
➢ Prescribe reliability standard as the interim
reliability measure (i.e. maximum unserved energy
of 0.0006%)
➢ Revert definition to reliability standard (i.e.
0.002%) after June 2025 when the interim
reliability measure ceases
Electricity Infrastructure Investment Safeguard: reliability standard
Department of Planning, Industry and Environment
Competitive tenders
• Consumer Trustee conducts tenders for LTESA,
regulations can guide how these are carried out
➢ Principles to follow in carrying out tenders:
• Meet investment objectives efficiently
• Provide competitive pressure for highest
long-term financial value LTESAs
• Value offers based on range of factors
including wholesale price, network
investment, essential system services
• Minimise transaction costs
• Provide ethical, fair treatment with reasonable
administrative costs for participants
• Consider and adjust given technology, market
Electricity Infrastructure Investment Safeguard: question 3
Question 3: To what extent are the requirements for
carrying out competitive tenders of LTESAs
appropriate? Should any other requirements, if any,
be taken into account?
Department of Planning, Industry and Environment
Tranche 2 issues paper proposes what should be
considered when preparing the IIO report:
• Timing, scale and lead times of projects
• Supply demand balance across regions of the NEM
• Preferred and alternate scenarios for new infrastructure
• Delivered electricity costs for electricity customers
• Forecast unserved energy and breach of the Energy Security Target
• How to minimise risks and regrets to consumers of over- or under-investment
• Relevant processes in other regions of the NEM and AEMO’s Integrated System Plan
• The outcomes of previous tenders for LTESAs
• Changes since previous reports
Electricity Infrastructure Investment Safeguard: question 4
Infrastructure Investment Objectives (IIO) Report
20 Year Development
Pathway
Sets out the
infrastructure to be
constructed over a
20 year period to meet
the IIO
10 Year Tender Plan
Sets out plan for the
competitive tenders over
10 years to give effect to
the development
pathway
➢ Prescribe matters the Consumer Trustee must
take into account in preparing first report, and
prescribe a separate list of matters to take into
account in preparing subsequent reports
Question 4: Do you agree with the matters that the
Consumer Trustee must take into account when
preparing the Infrastructure Investment Objectives
Report? Are there other matters which should be
taken into account?
Department of Planning, Industry and Environment
Electricity Infrastructure Investment Safeguard: question 5
Question 5: In what circumstances should the
Consumer Trustee prefer long duration storage over
firming infrastructure to meet the reliability standard?
The long term objectives (post-2030) for long duration
storage and firming infrastructure are both the reliability
standard.
The regulations may need to guide the Consumer
Trustee’s process for choosing between tenders for one
form of infrastructure over another.
Each type of infrastructure provides different services.
For example, long duration storage can reduce more
curtailment of variable generation, but may require longer
lead times to develop.
The conditional nature of the firming infrastructure
tenders and other factors suggest that long duration
storage is the Act’s prime way to support reliability.
However, the Minister may decide firming is required to
supplement long duration storage to deal with or near
term reliability gaps.
Department of Planning, Industry and Environment
Electricity Infrastructure Investment
Safeguard: clarifying questions
Department of Planning, Industry and Environment
Classification of REZ network
infrastructure projectCaroline Taylor, Specialist Policy Advisor, Transmission
Department of Planning, Industry and Environment
• Renewable Energy Zone (REZ) network
infrastructure projects will connect REZs to the
existing network
• Design options assessed and recommended by
Infrastructure Planner
• Projects are authorised by the Consumer Trustee
to be subject to NSW-specific economic regulation
• ‘REZ network infrastructure projects’ defined term;
consists of ‘classes’ of infrastructure prescribed by
regulation
Classification of REZ network infrastructure project
Preferential
treatment for
LTESAs in REZ
REZ
declaration
Access scheme
declarations and
access fee
determinations
Infrastructure Planner
develop options for
REZ network
infrastructure projects
CT considers options;
recommends Minister to
make direction or
authorise network
operator
Regulator
determines
prudent, efficient
and reasonable
capital costs for
project
Regulator
determines
amount payable
to operator
Network
operator builds
REZ network
infrastructure
Department of Planning, Industry and Environment
Classification of REZ network infrastructure
• To capture the different kinds of network
infrastructure that may be required for REZ
• Clarify whether a project (or part of it) is subject to
NSW-specific economic regulation
• To differentiate ‘REZ network infrastructure
project’ from ‘network infrastructure’ (another
defined term that refers to transmission and
distribution infrastructure generally)
➢ Three classes:
• Network infrastructure
• REZ network infrastructure – Regulated
• REZ network infrastructure – Unregulated
Classification of REZ network infrastructure: questions 6 and 7
Question 6: Are there any other considerations that
should be taken into account in classifying REZ
network infrastructure in regulations, including the
need for, and scope of, sub-classifications?
Question 7: What types of network infrastructure
could be subject to economic regulation under Part 5
of the EII Act?
Department of Planning, Industry and Environment
Classification of REZ network
infrastructure: clarifying questions
Department of Planning, Industry and Environment
Compliance and enforcement
Andrew Pirie, Principal Policy Officer, Roadmap Implementation
Department of Planning, Industry and Environment
• EII Act prescribes offences that carrying penalties,
which can be prescribed as penalty notice
offences
• To enforce penalty notice offences, regulations
must prescribe a class of persons as authorised
officers
➢ Prescribe as penalty notice offences:
• Failing to provide information requested to Energy
Security Target Monitor
• Unlawfully disclosing protected information
• Unlawfully disclosing information in administration
of EII Act
➢ Prescribe officers of Regulator as authorised
officers
➢ Prescribe penalty amounts for penalty notice
offences
Compliance and enforcement
Category of
offences
Intent
Information gathering
powers
Strengthens the Energy Security
Target framework
Network
infrastructure projects
Reinforces processes to build
out REZ and priority network
infrastructure
Administrative Enhance governance and
accountability of Roadmap
entities
Department of Planning, Industry and Environment
Compliance and enforcement: clarifying
questions
Department of Planning, Industry and Environment
Submissions due 5pm, Friday 21 May 2021
To make a submission, navigate to ‘Electricity
Infrastructure Investment Regulations’ at
energy.nsw.gov.au/electricity-infrastructure-roadmap
Next steps
Department of Planning, Industry and Environment
Thank you