Over the next decade, NSW will completely transform the way in which it generates, stores and transmits electricity.
The Electricity Infrastructure Roadmap is an ambitious policy framework that co-ordinates investment in new infrastructure to ensure that the transition delivers a cleaner, more affordable and more reliable electricity network.
AEMO Services has been appointed as Consumer Trustee, with a legislated mandate to represent the interests of energy consumers across a number of important Roadmap functions, including:
- Designing and conducting tenders to accelerate project plans into built generation, storage and firming infrastructure.
- Developing Infrastructure Investment Objective Reports – the central-planning document for the Roadmap, which set out a development pathway for the state’s electricity infrastructure over the next 20 years and a tender plan for the next decade.
- Authorising renewable energy zone network infrastructure on the basis of consumer value.
- Appointing a Financial Trustee to establish the Scheme Financial Vehicle, which serves as a contractual counterparty for Roadmap service agreements.
The Roadmap is making progress in its ambition to deliver at least 12 GW of new renewable electricity generation by 2030.
- The Roadmap will support the private sector to deliver at least 12 GW of new renewable electricity generation
- Since the Roadmap was enacted more than 4.4 GW of generation has been committed across New South Wales
Roadmap entities
Implementation of the NSW Electricity Infrastructure Roadmap depends on a number of different entities.
Collectively, we are incentivising and bringing forward private investment in a holistic way, that delivers opportunities for host communities, First Nations peoples, and regional economic development, and supports reliability, affordability and sustainability of electricity supply for consumers.
Together, we are working to deliver the Roadmap – an ambitious policy framework that coordinates investment in generation, storage and firming infrastructure to deliver whole-of-system benefits, transforming the energy system into one that is clean, reliable and sustainable.
Scheme Financial Vehicle (SFV) has been established by the Financial Trustee, as a proprietary company limited by shares. Those shares are held on trust by the Financial Trustee (by way of a statutory trust), independent of the State of NSW. SFV has a number of statutory functions under the Electricity Infrastructure Investment Act 2020, including establishing and maintaining the Electricity Infrastructure Fund and serving as the independent counterparty to long-term energy service agreements with project proponents recommended by the Consumer Trustee’s rolling tender process. It also provides revenue, as determined by the Australian Energy Regulator (AER) for Renewable Energy Zone network infrastructure projects and priority transmission infrastructure projects developed under the Roadmap.
The Australian Energy Regulator (AER) is appointed as a regulator under the NSW Electricity Roadmap and has a number of statutory functions, including determining the amount payable to network operators for network infrastructure projects. The AER makes 5-year revenue determinations for network infrastructure authorised by the Consumer Trustee including the calculation of the prudent, efficient and reasonable capital costs of these projects; makes annual contribution determinations in relation to the Electricity Infrastructure Fund; approves a risk management framework developed by the Consumer Trustee; and reviews tender rules in relation to long-term energy service agreements.
As the Energy Security Target (EST) Monitor, the Australian Energy Market Operator (AEMO) is responsible for calculating and setting a 10-year energy security target for New South Wales and providing a continuous assessment of the network’s capacity to meet this target. The EST is designed to provide market certainty as it ensures that there will be reliable supplies of electricity available to meet electricity demands over the medium term.
The Renewable Energy Sector Board comprises representatives of unions, the steel, electricity and manufacturing sectors, the renewable energy industry, and consumer advocates. The Renewable Energy Sector Board provides the Minister for Energy with a plan for the NSW renewable energy sector in relation to the operation of the sector and the manufacture and construction of infrastructure in the sector. AEMO Services is required to consider this plan when exercising its functions as the Consumer Trustee. The Renewable Energy Sector Board also advises the Minister for Energy on actions intended to drive sustainable growth and competitiveness of local industries, and to realise benefits for local workers and communities in relation to the construction of generation, storage and network infrastructure. This includes making recommendations on the use of locally produced and supplied goods and services, employment of suitable qualified local workers, and opportunities for apprentices and trainees, in the construction of generation, storage and network infrastructure.
The Electricity Infrastructure Jobs Advocate is an independent statutory office that advises the Energy Minister on strategies and incentives to encourage investment, development, workforce development, employment, education and training in the energy sector as New South Wales transitions to renewable energy. The Jobs Advocate has a particular focus on the Hunter, Central Coast, Illawarra, Far West, South-West, New England and the Central West regions of NSW. The Jobs Advocate also provides advice on road, rail and port infrastructure required in those regions to promote export opportunities for generation, storage and network technology.
Our role as NSW Consumer Trustee
At a time of rapid change in the dynamics of demand and supply in the NSW energy market, AEMO Services is an independent voice for the consumer in the decisions that will shape the future of our energy sector.
In 2021, the NSW Government appointed our organisation as the Consumer Trustee, giving us a duty to protect the long-term financial interests of NSW electricity consumers. This responsibility is at the core of everything we do.
As the Consumer Trustee, we co-ordinate planning of long-term investment in generation, storage and transmission in New South Wales, design and conduct competitive tenders to facilitate this investment, undertake authorisation of Renewable Energy Zone transmission infrastructure, and provide financial risk management and advice.
Designing tender processes to identify the best generation and storage projects for consumers.
Designing long- term agreements to encourage new generation and storage investment.
Managing and approving tender processes to identify the best generation and storage projects for consumers.
Through our competitive tenders and coordinated planning of long-term investment, we act in the long-term financial interests of NSW electricity consumers by supporting an energy transition that delivers quality energy, when it’s needed, and in a way that secures consumer value.
By running efficient and regular competitive tenders we ensure competition thrives and only the best, most efficient projects that deliver energy in a socially responsible way are supported to construction and operation as early as possible. Successful projects enter into innovative Long-Term Energy Service Agreements, which encourage investment whilst protecting consumers from high energy prices.
We are also responsible for the authorisation of Renewable Energy Zone network infrastructure, which is an important check and balance on consumer value from the development of this infrastructure.
Contributing to positive consumer outcomes, we will drive competition between technologies and proponents and deliver a more efficient investment process.
Delivering value for consumers
Over the last year, AEMO Services as the Consumer Trustee engaged closely with proponents and other stakeholders to design innovative products and processes that incentivise investment, minimise the impacts of intervention in the market to place downward pressure on prices.
We’re now at the final stages of our first competitive tender that will help support the most promising projects to receive support to bring new energy infrastructure to market sooner than would otherwise have been the case.
We’ve shortlisted 16 projects representing more than 4.3GW of generation and long duration storage for the next tender stage – enough to power almost 1.6 million homes and accelerate NSW’s energy transition.
AEMO Services is expected to conduct a further three tenders in 2023, including for generation, long duration storage and firming infrastructure.
Drawing on insights from this market engagement, experts from our team finalised the design of key elements of the Roadmap, including:
- The process for the inaugural tender which will serve as the basis for bi-annual tenders for at least the next decade;
- LTESA’s, the innovative contracts for generation and long duration storage projects available through the tender process;
- The 2021 IIO report and the Firming IIO Report, which set out the expected timing and size tenders for firming, generation and long-duration storage infrastructure; and
- A LTESA for firming infrastructure, which will be available through the firming infrastructure tender.
AEMO Services has worked extensively to prepare for the establishment of the Scheme Financial Vehicle (SFV), which serves as the independent counterparty to LTESA’s and provide revenue (as determined by the AER) for Renewable Energy Zone network infrastructure projects and Priority Transmission Infrastructure Projects developed under the Roadmap. The SFV achieved an Aa3-stable credit rating from Moody’s.
AEMO Services has also appointed Equity Trustees Limited as the Financial Trustee – the entity that establishes and administers the SFV under the Roadmap – and the SFV has established the Electricity Infrastructure Fund to manage cash inflows and outflows.
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The Consumer Trustee is an independent body appointed by the NSW Government under the Roadmap to carry out coordinated planning of long-term investment, competitive tenders to facilitate this investment, authorisation of Renewable Energy Zone transmission infrastructure, and to provide financial risk management and advice. Central to this mandate, is the duty to act independently and in the long-term financial interest of NSW electricity consumers.
AEMO Services, an independent subsidiary to the Australian Energy Market Operator (AEMO), was appointed as the Consumer Trustee in 2021.
The Consumer Trustee is committed to delivering the energy transition at least cost to NSW electricity consumers. We do this by ensuring consumers are considered in every decision we make in our day-to-day operations from procuring professional services to recommending transformational energy infrastructure.
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Through our competitive tenders and coordinated planning of long-term investment, we act in the long-term financial interests of NSW electricity consumers by supporting an energy transition that delivers quality energy, when it’s needed, and in a way that secures consumer value.
By running efficient and regular competitive tenders we ensure competition thrives and only the best, most efficient projects that deliver energy in a socially responsible way are supported to construction and operation as early as possible. Successful projects enter into innovative LTESA’s, which encourage investment whilst protecting consumers from high energy prices.
We are also responsible for the authorisation of Renewable Energy Zone network infrastructure, which is an important check and balance on consumer value from the development of this infrastructure.
In line with our value of transparency, our important work to date our future goals and our operational costs have been published in our Corporate Plan (AEMO Services Corporate Plan at a Glance 14/12/2022) available on our website.
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Under the NSW Electricity Infrastructure Investment Act 2020 (EII Act), the Australian Energy Regulator (AER) is required to make an annual Contribution Determination to confirm the costs of implementing the NSW Electricity Infrastructure Roadmap (Roadmap) and facilitate the recovery of these costs through payments from NSW distribution network service providers (DNSPs).
These costs, include payments to network operators, the costs associated with Long-Term Energy Service Agreements (LTESAs), and the administrative costs of six appointed Roadmap entities:
- Australian Energy Regulator (AER) as a Regulator
- Energy Co as the Infrastructure Planner
- AEMO Services as the NSW Consumer Trustee
- Equity Trustees Limited as the Financial Trustee
- Scheme Financial Vehicle administered by Equity Trustees Limited, and
- Income Pricing And Regulatory Tribunal (IPART) as a Regulator.
Roadmap advisory bodies, including the Renewable Energy Sector Board, Infrastructure Jobs Advocate, Energy Security Target Monitor and Employment Purpose Committee, are funded separately by the NSW Government.
The NSW DNSPs then pass Contribution costs through to retailers who in turn recover the amounts from NSW electricity consumers through network charges on their retail bills.
The costs reported in the Contribution Determination cover one year lagging (this current financial year) and two years leading (forecasts of future potential costs).
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The role of NSW Consumer Trustee is the foundational role performed by AEMO Services. As such, our costs are currently exclusively funded through the Roadmap. This year, all our operational costs have been reported in the Contribution determination.
The costs reported are as follows:
This year AEMO Services, as the NSW Consumer Trustee, reported the following costs:
Expenditure Unit FY 2022-23 FY 2023-24 FY 2024-25 Administration $ millions 36.77 35.65 36.52 The FY23 financial year is budgeted to be the first full year of operation.
Next Steps
The contribution determination specifies only the costs DNSPs are to pay to provide for the functions of the Roadmap. Further information on the direct cost to consumers will become available over the coming months through AER announcements.
For further information on the Roadmap policy and achievements visit www.energy.nsw.gov.au.
For further information on the Contribution Determination visit the AER website.