R1 Investment Certainty

On 17 May 2023, the Clean Energy Council (CEC) submitted the Enhancing investment certainty in the R1 Process rule change request to the Australian Energy Market Commission (AEMC). The request sought to drive investment certainty by clarifying the process and responsibilities for the assessment of a generator’s ability to meet its performance standards as a requirement of market registration – known as the ‘R1 process’.

Background

During initial discussions held in the Connections Reform Initiative scoping, industry raised concerns that the National Electricity Rules (NER) were unclear regarding what modelling and additional analysis could be requested of generators and developers during the ‘R1’ phase.

R1 is the period between the project’s financial commitment (following the execution of the connection agreement) and the commencement of revenue (following registration and commissioning). The R1 Investment Certainty workstream was formed and led by the CEC to investigate and draft a rule change request to the AEMC.

The CEC collaborated extensively with developers and generators, investors, Network Service Providers (NSPs) and AEMO, as well as experts from KPMG, to understand the key challenges in the R1 process and to identify workable solutions to them.

Key elements included in the CEC’s request were to:

• Provide generation applicants with more certainty on the process (including timeframes) for AEMO and NSPs to assess a generator’s detailed design and R1 modelling packages (R1 package) and for AEMO to approve the project’s registration.
• Increase transparency by requiring justification from NSPs and AEMO where additional information or modelling requests were made.
• Enable more efficient allocation of risks and costs between NSPs and generators to manage system security risks identified at the R1 stage.
• Remove barriers to a NSP and AEMO agreeing to alterations to the generator performance standards in the Connection Agreement, by clarifying where such changes were likely to have no material impact on system security.
• Introduce a new facilitated review process to manage intractable issues that emerge between generators, NSPs and AEMO.
• Clarify the process for conditional registrations.

After making substantial changes to its draft determination and draft rule to incorporate feedback from the CEC, AEMO and other stakeholders, the AEMC published its final rule on 27 June 2024.

Final Rule

The final rule:

• Removes barriers to sensible revisions of a generator's performance standards.
• Clarifies the obligations of all parties during the R1 process.
• Requires AEMO to outline the process for assessing the capability of a generating system to comply with its agreed generator performance standards (capability assessment) in updated registration information resource and guidelines.

AEMO consulted with stakeholders to update the guideline as part of the R1 Capability Assessment workstream.