Cogati will have "chilling effect" on renewables investment, warns CEC | RenewEconomy

Cogati will have “chilling effect” on renewables investment, warns CEC

CEC welcomes overall direction of new market rules, but warns the Cogati transmission access proposals are the “wrong reform at the wrong time.”

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The Clean Energy Council has warned against the introduction of electricity network transmission access reforms proposed by the Energy Security Board, arguing that they risk increasing the cost of new renewables projects, raising electricity costs, and stifling new investment.

In a detailed submission to the Australian Energy Market Commission, the CEC said it broadly supported the ESB’s direction for the future design of the National Electricity Market, but insisted that the market design initiative on transmission access was the “wrong reform at the wrong time.”

The AEMC’s much-maligned COGATI program (Co-ordination of generation and transmission investment) was in March folded into the process being conducted by the Energy Security Board, after plans to rush it through met significant push-back from the renewables industry.

The ESB in the last week of September held a series of webinars outlining its thoughts about the market re-design that is due to be finalised next year and come into effect post 2025 – and seeking input by the start of this week.

In its submission released on Monday, CEC chief executive Kane Thornton said the industry body broadly welcomed the high-level directions outlined in the ESB’s Post-2025 Market Design Consultation Paper.

“In particular, we are pleased to see the work to value essential system services and better integrate distributed energy resources,” Thornton said.

But, he added, the CEC remained “firmly opposed” to the transmission access reforms proposed by the AEMC, which Thornton stressed would do very little to improve the co-ordination of generation and transmission while increasing risk, complexity and cost to the market.

“This reform will fundamentally alter current market operations through the introduction of locational marginal pricing and financial transmission rights,” the CEC says. “The AEMC also proposes to move to dynamic loss factors, which will be more volatile and unpredictable than the current, already problematic marginal loss factor regime, without any capability for generators to manage the associated risks.”

Thornton says a CEC member survey found that the COGATI reform would add 1.4 per cent risk premium to new projects, as well as existing projects as they sought to refinance over the next few years.

This, in turn, was projected by the CEC’s analysis to result in a $5.50/MWh increase to wholesale prices, equivalent to approximately $990 million in additional consumer costs across the NEM.

And for state governments, the increased risk would raise the cost of meeting renewable energy targets – to as much as $55 million a year for Queensland and in excess of $27 million a year for Victoria.

“The COGATI proposal is a case of the wrong reform at the wrong time. It will have a chilling effect on investment at a time when we need to be attracting new investment to replace ageing thermal generators and stimulate economic activity in response to COVID-19,” Thornton said.

“With these high costs and risks, we cannot support the proposal. We encourage the AEMC to down tools on this reform proposal in order that AEMC and industry resources can be redirected to more pressing issues within the ESB’s market reform package, as well as actioning of the Integrated System Plan, development of renewable energy zones and addressing connection issues,” he said.

The remainder of the package, however, looks good, and is a much needed redesign of an energy system that is “the legacy of another era and isn’t fit to support the new, more distributed, flexible, intelligent and clean energy generation that we need and want.”

Thornton said although much detail remained to be solved, the CEC was pleased to see the work to value essential system services and better integrate distributed energy resources.

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