NEMUCO National Electricity Market Management Company Ltd

ABN 94 072 010 327 16 June 2009

The Hon John Pandazopoulos Chair Environment & Natural Resources Committee, Parliament of Parliament House Spring Street EAST MELBOURNE VIC 3OO2

By Email : enrc@¡tarliament.vic.gov.au

Dear Mr Pandazopoulos

lnquiry into the Approvals Process for Renewable Energy Projects in Victoria

Thank you for your letter dated 9 June 2009 requesting information to assist the Environment

& Natural Resources Committee in this inquiry. Please find attached some comments that I hope the committee finds useful.

NEMMCO is the independent operator of the National Electricity Market (NEM) which spans Victoria, , , , and the Australian Capital Territory. As of 1 July 2009, NEMMCO will become part of the Australian Energy Market Operator (AEMO). The Victorian Energy Networks Gorporation (VENGorp) will also become part of AEMO. We understand VENCorp have contributed separately to this review via the Department of Primary lndustries.

We require that Generators of capacity greater than 5MW1 connecting to the NEM must be registered with us, and thus our registration process forms a necessary part of the approvals process for all large-scale renewable energy generators.

Should you have any enquires on these comments, please contact Ben Skinner (03) 9648 8769.

Yours sincerely

Chief Executive Officer

Enc.

1 of the entire generating complex, i.e. a wind farm turbines totalling more than SMW must be registered

Manslield Office Norwst Office PO Box 251 ó PO Box 7326 Mansfield QLD 4122 Baulkham Hills BC NSW 2153 Tel: (07) 3347 3 I 00 Tel: (02) 8884 5000 Fax: (01)3347 3200 Fax: (02) 8884 5500 NEMMCO comments to ENRC lnquiry into Approvals Process for Renewable Energy Projects in Victoria

1. Sinclair Knight Merz (SKM) report to Australian Energy Market Commission (AEMC): Timelines for new generation in the NEM

As part of the AEMC's Review of Energy Market Frameworks in light of Climate Change Policies first interim report, the AEMC engaged the engineering consulting house SKM to report into development timelines of new power generation in the NEM. Section 4 lists the various states' planning and environmental statutory consents required for the construction of major generators. These would also apply to renewable generators.

The reporl is publicly available on the AEMC's website2 and the committee may find this a useful reference to the regulatory processes facing such generators.

2. NEMMCO new generator guides and access standards

Connection to the grid of any large-scale renewable generator requires the generator to first: . Apply to connect to the relevant Network Service Provider (NSP); and . Apply to register with the market operator, NEMMCO.

Timelines for responses to these applications are defined in the National Electricity Rules (NER).

For an explanation of these processes, please refer to "Connecting New Generators-A Process Overview" published as a guide for intending generators on the NEMMCO website "New Generator Connections" page3.

For a more detailed explanation of the NEMMCO registration process, see the NEMMCO generator registration guide published under the "Registering in the NEM" page4.

NEMMCO recommends the committee becomes familiar with these processes if it intends to investigate options for accelerating NEM connection and registration.

The connection of a large-scale generator can affect the technical performance of the grid and thereby detriment power system security. Thus a regime of access standards exists in the NER obliging certain standards of technical performance. The NER also permits negotiated access standards where a lower level of technical performance is acceptable in some situations subject to the agreement of the NSP and NEMMCO. Most large-scale generators achieve a negotiated access standard.

NEMMCO considers that the regime and timeframes are broadly appropriate considering the technical due diligence that must be performed on each application. Our experience is that difficulties commonly arise when intending generators provide incomplete information with their application such that the NER timeline cannot begin immediately.

As a general comment, we observe that the most straightfonruard applications to connect and register occur when these processes are planned by the generator at an early stage and carried out as an integrated part of their project development plan. NEMMCO comments to ENRC lnquiry into Approvals Process for Renewable Energy Projects in Victoria

3. Confidentiality Arrangements in respect of lnformation required for System Studies ln determining the likely acceptable level of negotiated access, it is necessary for parties to perform detailed electrical engineering studies of the network. This requires specific data to be provided by existing and other intending generators. lf this data is treated as confidential it becomes difficult for parties, including intending generators, to perform these studies.

Thus on 19 Feb 2009 a NER change was made to permit the sharing of this information within certain limitationss. Transitional arrangements were also put in placeô such that the full benefit of the rule change will not be realised until 2010.

This rule, which was proposed by the National Generators Forum, was supported by NEMMCO. We believe it should be permitted to operate for a period in its current form before considering further changes.

4. Confidentiality Provisions for Network Connections

Connecting generators must procure and fund connection assets to the existing shared network. Some large-scale renewable generators are remote from the network so this can be a significant cost. Where multiple generators are considering connection in a general location, the providers can often achieve connection more efficiently and cheaply if they plan co-operatively.

NSPs occasionally receive multiple connection enquires from intending generators where it is clear that such co-operations have not been fully explored. The current confidentiality arrangements in the NER limit the ability of NSPs to share such information between developers.

Grid AustraliaT has proposed to the AEMC a NER change8 that enables NSPs to publish general information about connection enquires. NEMMCO supports this proposal as a practical way to encourage more co-operative planning by intending generators.

NEMMCO hopes this will lead to more efficient connection planning in future, however it notes that it will be some time before its success is evident.

5. State versus National Approaches

The NER lays out nationally consistent approaches to matters such as: . Connection and registration processes; . Funding of network assets; . Access standards.

5 See http://www.aemc.gov.auiMedia/docs/Final%20Rule%20Determination-6a9dO47f-7)af-487a- 92dc-38 b80c6de9f9-0. pdf See section 2 of http://www.aemc.qov.au/Mediaidocs/Rule%20as%2}Made-7 8e6697e-ca2f-4381- b4a2-038fa0531 06d-0. pdf 'An o u see Connections html NEMMCO comments to ENRC lnquiry into Approvals Process for Renewable Energy Projects in Victoria

These approaches do enable the connection of large-scale renewable projects as evidenced by the wind-generators who have connected to date. Where improvements can be made to any of these matters, the NEM has a well governed change process that permits any person to propose a rule change to the AEMC, who will assess it based on its contribution to the National Electricity Objectivee.

Jurisdictionally-based deviations from the national approach generally serve as a barrier to investment as most developers operate across jurisdictions. NEMMCO would therefore recommend against the committee contemplating Victoria-specific variations to matters that are already laid-out in the NER. lnstead, should the committee identify opportunities for improvement, it should propose these into the NER's rule making process.

e See http:i/wrvw.aemc.qov.aui Electricitv/Electricity-Market.html for definition of the objective.