On the 6 March 2014, the Australian Energy Market Commission (AEMC) released terms of reference to progress work on the Optional Firm Access (OFA) framework initially outlined in the Transmission Frameworks Review published in April 2013. If adopted, OFA would fundamentally alter the operation of the National Electricity Market (NEM). In this update, we briefly examine:
- Timeline including the next steps
- Potential benefits of OFA?
- How might OFA work?
- A practical example
- Key implications
- Key questions
- Excerpt from What are the potential benfits of OFA for the NEM?
Potential benefits for the NEM include:
More efficient investment in new transmission through co-optimisation of the costs of transmission and generation. OFA should assist generators and Transmission Network Service Providers (TNSPs) to co-optimise their investments. The purchase of firm rights by generators would provide a signal to TNSPs as to where additional transmission investment is necessary. The importance of co-optimising generation and transmission investment will take on greater importance if the trend toward new generation being renewable continues. However, new transmission investment would still be dependent upon passing the RIT-T and the ability of the TNSP to receive adequate compensation through its revenue regulation.
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