NSW Electricity Infrastructure Roadmap Tranche Two ...

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


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


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


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


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


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


Overview of different tranches of regulation


Indicative timeline


Energy Security Target

Liam Ryan, Executive Director, Strategy and Implementation


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)



= Maximum Demand + Reserve Margin


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.


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?


Energy Security Target: clarifying questions


Electricity Infrastructure Investment

SafeguardMelanie Koerner, Lead, System Planning, Reporting & Engagement, Consumer

Trustee Establishment Team


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


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


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?


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


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?



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.


Electricity Infrastructure Investment

Safeguard: clarifying questions


Classification of REZ network

infrastructure projectCaroline Taylor, Specialist Policy Advisor, Transmission


• 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


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?


Classification of REZ network

infrastructure: clarifying questions


Compliance and enforcement

Andrew Pirie, Principal Policy Officer, Roadmap Implementation


• 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


Compliance and enforcement: clarifying

questions


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


Thank you

[email protected]

mailto:[email protected]

NSW Electricity Infrastructure Roadmap Tranche Two ...

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