National energy objectives update: future trials to be assessed against potential for emissions reduction
Overview
One of the principles under which regulatory sandboxing
A Regulatory Sandboxing mechanism is a framework within which participants can test innovative concepts in the market under relaxed regulatory requirements at a smaller scale, on a time-limited basis and with appropriate safeguards in place. Regulatory Sandboxing mechanisms usually also offer enquiry services, which provide innovators with informal guidance on existing regulation. The Energy Innovation Toolkit is a Regulatory Sandboxing mechanism.
trials are assessed in the Australian Energy Regulator
The Australian Energy Regulator (AER) regulates electricity networks and covered gas pipelines in all jurisdictions except Western Australia. The AER sets the amount of revenue that network businesses can recover from customers for using these networks. The AER also enforces the laws for the National Electricity Market (NEM) and spot gas markets in southern and eastern Australia, as well as monitoring and reporting on the conduct of market participants and the effectiveness of competition.
These objectives govern and guide the energy market bodies and their activities under the relevant national energy legislation.
The energy objectives promote efficient investment in, and efficient operation and use of, energy services for the long-term interests of consumers of energy with respect to price, quality, safety, reliability and security of supply of energy, as well as the reliability, safety and security of the national electricity system.
What has changed?
On 19 May 2023, Energy Ministers agreed to an amendment of the national energy laws[1] which adds emissions reduction to all three energy objectives. Subsequently, the Emissions Reduction Objectives Act 2023 was passed by the South Australian Parliament (the lead legislator for the National Energy Laws) and assented to in September 2023.
Specifically, the NEO, NERO and NGO has been amended to state that the objectives cover:
the achievement of targets set by a participating jurisdiction-
for reducing Australia’s greenhouse gas emissions; or,
that are likely to contribute to reducing Australia’s greenhouse gas emissions.
How will future sandboxing trials be affected?
Incorporating emissions reduction into the energy objectives means that energy market bodies will need to balance consideration of emissions reduction with the existing considerations of price, quality, safety, reliability, and security in applying the energy objectives to their activities.
For the Energy Innovation Toolkit this means that proponents applying for future sandboxing trial waivers or trial rule changes will need to consider whether a proposed trial would contribute to the achievement of the updated energy objectives.
The innovative trial principles
Under the Energy Rules, the Australian Energy Regulator (AER) is required to consider innovative trial principles in determining whether a trial project is “genuinely innovative” and therefore may be considered for a trial waiver.
prescribed in the National Energy Laws direct the AER and AEMC to take into account whether the trial is like to contribute to the achievement of the updated energy objectives as we assess trial waiver
The Regulatory Sandboxing trial waiver function allows the Australian Energy Regulator (AER) to grant a time limited trial waiver for eligible trial projects, exempting an innovator from having to comply with specified rules for a period of time to allow a trial to proceed. The Victorian Regulatory Sandboxing trial waiver function allows Essential Services Commission (ESC) to issue trial waivers providing time limited relief from Victorian energy frameworks. For more information, please see our trials page and the AER's Trial Projects Guidelines.
or trial rule change
Regulatory Sandboxing legislation will provide the Australian Energy Market Commission (AEMC) with a new power to make temporary rule changes to allow trials to proceed. This could be used to temporarily amend existing rules or to temporarily introduce a new rule of limited application. In deciding whether to make a trial rule, the AEMC must take into account the list of principles established in the Regulatory Sandboxing innovative trial principles, and the requirements listed in the Regulatory Sandboxing eligibility requirements, to determine whether a proposed trial rule is genuinely innovative. For more information about the innovative trial principles and eligibility requirements as they apply under the Energy Rules to both trial rule changes and trial waiver requests, please see the Australian Energy Regulator's Trial Projects Guidelines.
applications.
The relevant Bill commenced for the Australian Energy Market Commission
The Australian Energy Market Commission (AEMC) is an independent statutory body that works for Australia's future productivity and living standards by contributing to a decarbonising, affordable and reliable energy system for consumers. The AEMC makes and amends the National Electricity Rules (NER), the National Gas Rules (NGR), and the National Energy Retail Rules (NERR), and manages the rule change process. The AEMC does this in accordance with the national energy objectives, the central focus of which is the long-term interests of consumers. They also provide market development advice to governments.
on 21 September 2023. The AER will apply the updated NEO to the regulatory sandboxing function two months from this commencement date, on 21 November 2023.[2]
The Essential Services Commission (ESC) is an independent regulator that promotes the long-term interests of Victorian consumers with respect to the price, quality and reliability of essential services. In Victoria, the ESC has responsibility for licensing and licence exemptions in the electricity and gas markets. The ESC licenses various activities including electricity and gas retail and distribution, electricity transmission, and electricity generation. The ESC also makes and enforces customer protections and other rules predominately in the electricity and gas retail and distribution markets in Victoria, where the National Energy Retail Law (NERL) and the National Energy Retail Rules (NERR) don't apply.
of Victoria’s Trial Project Guideline (specific to projects operating under Victorian energy frameworks)
[1] Statutes Amendment (National Energy Laws) (Emissions Reduction Objectives) Bill 2023
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