A forward focused policy-alignment test for the ISP would be a material improvement on the status quo. What matters more is that governments, governance bodies and market participants share a clear view of what they are working towards, and where the gaps remain.
There are three separate ideas here. The first is that the plan needs to be driven by AEMO's Integrated System Plan. The second is that there is some kind of target environmet we are working towards. The third is that the various governments and sector entities can work co-operatively to one goal.
Benetti is unfortunately correct in his criticism of the ISP as being a forecast - i.e. what is most like;ly to happen rather than a plan of action to make changes to the system directed at the goal of netzero by 2050 (at least across electricity generation and the consumption of oil for transport and gas for household use or industrial heat. Partially because of where it sits in AEMO, the ISP has degenerated into a forecast with some sensitivity analysis.
In part this change was also driven by the Collective* who changed the ISP rules to make it function as an investment test. As part of the legislative package foloowing the ESB recommendations on making the ISP 'actionable' the ISP was required to only take acount of policies of Governments tha were committed either by funding or legislation. That review also that introduced the ISP Consumer Panel (a bowdlerisation of an idea included in the ECA response to that process that I drafted).
As part of the National Energy Transformation Partnership, the Collective announced in December 2022 that it would:
Develop detailed integrated energy infrastructure and regional planning scenarios that span gas and electricity networks, electrification pathways and new industry possibilities to identify jobs and investment pathways for renewed manufacturing and new industries, like hydrogen.
The Collective welcomes the Australian Government's commitment to the Partnership through a $151M allocation in the 2002 budget. This funding was for projects including:
Coordinating gas and electricity planning, by commencing a review of the Integrated System Plan (ISP) to ‘supercharge’ the 2024 ISP and future integration of system planning across the gas and electricity sectors. The review will also work with non-NEM jurisdictions to support more coordinated investment and delivery. (Collective Communique 28 October 2022).
At their meeting in July 2023 the Collective agreed to:
the Terms of Reference for the review of AEMO’s Integrated System Plan (ISP) and for the National Energy Workforce Strategy
In March 2024 the Collective:
Considered the review of the Australian Energy Market Operator’s (AEMO’s) Integrated System Plan (ISP) and its recommendations, and have agreed to a set of actions in response that will enhance the ISP to plan for the transformation across the entire energy system, including gas. Ministers accepted 15 recommendations, which include undertaking a more robust assessment of gas market conditions and better integration of demand-side opportunities.
There is little detail in the final report of the review on what alternaives were considered. The Government response shows there was little value-add from the review, as the recomendations largely reflect the terms of reference. The single most troubling aspects were:
- The idea that the ISP is a forecasting tool as reflected on an emphasis on better demand forecasts, and
- That as a planning tool the the ISP is subserviant to the policy and planning positions of the jurisdictions.
If we contrast these positions to the alternativ view of the ISP as a strategic tool rather than a forecasting tool, the scenario development for the ISP would be unconstrained by current policy positions. The only thing scenarios would need to have in common would be achievemet of zero emissions from electricity generation and elecrification to displace the use of oil for transport and gas for domestic use and for industrial process heat.
The original scenarios from the 2018 plan captured this better where the extent to which the future gid relied on distributed resources could be high or low, industrial demand including data centres could be high growth or low growth, and the rate of electrification could be fast or slow.
For each of these scenarios an optimal development path to realise the parameters of the scenario would be developed. These development paths should be informing the policy development (who would think we need informed policy) and the likelihood of scenarios then weighted by the indications of support for the required policies.
Only then should actual investments considered by evaluated, and they should be evaluated on a least regrets basis not a maximum return on investment. The only thing we can say with any certainty about a forecast is that it is wrong.
The unfortunate reality that Benetti has missed is that the ISP is already meant to reflect an optimal path given existing policy settings, whereas what we actually need is a plan that can identify the policies that will most cost effectively deliver the transition while maintaing reliability and quality of service.
The Consumer Panel's report on the Draft 2026 ISP included this classic:
Interaction between ISP and Policy remains vexed. That the ISP is required to consider all national and jurisdictional governments’ policy continues to be challenging. We anticipate that this requirement will be considered as part of the AEMC’s ISP review during 2026 and 2027.
The panel's concern is that AEMO is required to include policies that may have undergone no scrutiny, especially in relation to efficiency or social welfare (costs vs benefits). This is a tangential way of saying that the ISP should be the master and juridictional planning the servant.
Benetti's conclusion was:
The energy transition will not be won by any single institution acting alone. It will be won by institutions that are clear on their purpose and limits, and willing to work across boundaries to seize economic opportunities while meeting the National Energy Objectives.
Leaving the ISP with a team whose core focus is on the demand forecasing for dispatch is an inherent problem. There are governance solutions available for all this. But a hope that the transition can be delivered by a continuation of existing governance arrangements is misguided at best, and at worst delusional.
Note: I have not engaged in ISP process for about four years now. I simply despair over processes like the AEMC's ISP Review. If the AEMC makes proposals for Rule changes they can be implemented through a fast track mechanism by the Collective. However, the history of the Collective is that it very seldom requests of the AEMC the rule change request recommended by the AEMC.
* The Collective (or the Collective of Energy Ministers) is a single name to refer to an entiy that has had multiple incarnations since it was first established as the Ministerial Council on Energy. I adopted the term when the one group of people was operating with two names under the Morrison government.
*********************************
Life is what happens while you are busy making other plans JWL
No comments:
Post a Comment