AEMC backs off on COGATI rule change, relief for solar and wind sector

The Australian Energy Market Commission has dumped plans to rush through changes to transmission access rules, agreeing instead to have them considered as part of the overall redesign of the national electricity market.

In is a decision that will bring welcome relief to developers of wind and solar projects in Australia, the AEMC says the heavily criticised COGATI program (Co-ordination of generation and transmission investment) will now be folded into the marked design process being conducted by the Energy Security Board.

The renewable energy industry had feared that the COGATI process would be rushed through and presented to COAG energy ministers at the scheduled meeting this Friday.

While the need to reform the rules and regulations that have failed – spectacularly – to ensure sufficient investment in key infrastructure is widely recognised, there was concern that the AEMC proposals for locational pricing and transmission rights would not be workable and would erect yet more barriers to wind and solar developers.

“Welcome move by (the AEMC) to have COGATI reforms … now proceed through the ESB’s market design process,” Kane Thornton, the chief executive of the Clean Energy Council, tweeted on Tuesday. “Investors will be relieved this isn’t being rushed and now part of comprehensive process.”

The decision by the AEMC was likely inevitable given it was told at the last COAG meeting in December to go back and consult with stakeholders, and the clean energy industry had lobbied heavily for state energy ministers to resist the changes.

COGATI is one of two key rules from the AEMC considered key for future investment in wind and solar in Australia, along with doc-called “marginal loss factors”, which is the method used to calculate transmission losses for individual power plants.

The AEMC refused pleas by the clean energy industry to change the MLF, choosing instead to side with the incumbents who had argued against proposed changes to an “average loss factor”. but has decided to take a more moderate approach on COGATI which experts said would also favour the incumbent fossil fuel industry.

The Smart Energy Council described it as a cross-subsidy from renewables to the fossil fuel industry, a view echoed by the Clean Energy Council, the Victoria Energy Policy Centre, and a group of more than 20 large investors.

“COGATI is an extraordinarily complex beast, but its effect would be real and immediate – it would significantly reduce investment in large-scale renewable energy projects,” SEC’s John Grimes wrote in December.

ITK analyst David Leitch noted back in August that COGATI was rejected by most industry experts. “The transmission company representatives were more guarded in their comments (naturally) but it was pretty obvious they didn’t like it much. The wind and solar developers pretty much thought it stinks.

“Each of the participants was able to point to the lack of information, the many detailed scenarios that would seem to cause problems, the complexity and the lack of perceived benefits. Of course it could be argued they are talking their own book. But I happen to agree with them.”

The AEMC says it will now develop draft rules for transmission access and locational pricing by the end of this year, and work with the ESB to have them incorporated into the wholesale redesign of the market that is due to come into effect by 2025.