Discussion paper

In order to support the transition of the electricity system, the transmission network will need to develop to efficiently connect and transport large amounts of energy from dispersed renewable generation across the NEM, which is locating in different places to where generation has historically located, to where consumers want to use it.

Renewable energy zones are a useful first step on the path of more holistic access reform and can be implemented earlier than those changes required to implement our proposed access model.

The concept of a 'renewable energy zone' is not defined in the existing regulatory framework, and is used by different parties to describe different ideas and concepts, depending on what a particular party wants to achieve and do.

This paper seeks to provide some clarity as to the different ways renewable energy zones can be characterised, how these can be achieved under the current framework, the various issues that arise under those different characterisations, and how they can be better facilitated in the future.

Renewable energy zones can be characterised in two broad ways. In this paper we describe these as type A renewable energy zones and type B renewable energy zones.

  • Type A is a cluster of generators sharing connection assets only, which are those assets used by generators to connect to the transmission network. Type A renewable energy zones can already be facilitated under the current regulatory framework. To the extent that these opportunities are not being pursued, it is often due to factors outside the regulatory framework such as commercial and confidentiality considerations.
  • Type B is a cluster of generators sharing their connection assets as well as a part of the shared transmission network. The shared transmission network are those assets that facilitate the flows of electricity between all parties that produce and consume electricity i.e. facilitate flows to consumers. The key difference between type A B REZs is that type B includes assets that are used to facilitate flows to consumers directly, whereas type A REZs do not.

There are ways that both type A and B REZs can occur under the current framework. However, one of the main barriers to facilitating type B renewable energy zones is that there are no incentives under the current framework for generators to collectively fund assets for the shared transmission network. A generator that invests in the shared transmission network faces a free-rider problem and a risk of not being dispatched, despite the investment.

This paper presents a model that seeks to facilitate type B renewable energy zones and overcome the free-rider problem.

The outcomes of consultation on this paper will form an input into the COGATI review recommendations to the Energy Security Board in December 2019. The discussion and conclusions in this discussion paper are consistent with the proposals for dynamic regional pricing and financial transmission rights discussed in the accompanying COGATI access discussion paper that has been published alongside this paper.

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