Yesterday the 2026 ESOO was released … and, following from that, we wrote about ‘The grand ESOO Switch-a-Roo continues in 2026 … but hasn’t that approach jumped the shark?’.

There’s been a bit of discussion since that article, so this one has been written to follow-up and assist readers who are seeking to understand more:

• This article does (with the help of the tip from Ben Tudman in his comment here) help to provide some context to:
  • The process by which the ‘switch-a-roo with the ESOO’ decision was made; and
  • The reasoning that the AEMO used to propose such a change
• But this article does not speak to the effects (usefulness, wisdom etc) of that change (especially in hindsight).
  • Yesterday’s article does some of that
  • And, I expect, different readers will have their own perspectives.

Consultation process run in late 2022 and early 2023

As Ben Tudman noted, the decision to change the emphasis on scenarios modelled and presented (and particular with respect to ‘Commitment Criteria’) stemmed from the AEMO Consultation Paper ‘AEMO NEM Reliability Forecasting guideline and methodology consultation’ published 31st October 2022:

This paper was issued at the commencement of a process ‘NEM Reliability Forecasting Guidelines and Methodology Consultation’ documented here on the AEMO website.

• The final determination was made on 24th April 2023 (you can find those documents there),
• and there’s also plenty of other documentation there about workshops and 2 rounds of consultations and so on.

That reinforces Ben’s point that this change was:

‘a consulted piece of methodology that AEMO did that was agreed to (or at least not challenged) by the industry’

So whilst (elsewhere) we and others might assess whether the changes made have actually improved the process of managing reliability, the point here is that they were consulted on and determined via a process AEMO used.

Reasoning used (at the time)

We’ll keep this article focused on the reasoning AEMO initially used to promote the change … which we can see from p13/29 in section 3.2 ‘Increasing consistency of commitment criteria’:

Further down, a few things jumped out at me in helping to explain the reasoning at the time (reminder … not commenting on the whether wise or unwise, especially in hindsight) including the following:

Speaking to the delays added onto Developers (more optimistic) development schedules…

A couple snippets…

p14/29 ‘On average, projects took 576 days from becoming ‘Committed’ to becoming ‘In service’, while on average, developers assumed this would only take 150 days, indicating an average delay against developer provided information of over 400 days. ’

… and …

p14/29 ‘In this analysis timeframe, no ‘Anticipated’ project was identified as having completed commissioning, but the FCUD* provided by some developers at the time of becoming ‘Anticipated’ is already in the past.’

* with FCUD being First Commercial Use Date (i.e. after commissioning).

Why include ‘Anticipated’ projects in a planning model?

There is this…

p15/29 ‘In the last three years, only one ‘Anticipated’ project has become ‘Publicly Announced’ and has not yet become ‘Anticipated’ again.’

… which, to me, implies a decision criteria that they had not gone backwards (which matches with Ben’s point that):

‘My broad understanding is that it more or less holds up (Anticipated projects rarely regress), but I haven’t done the hard work and run the numbers since the time of that consultation

But (in my quick scan) did not see an argument for why to include Anticipated projects

(a)  i.e. they may not regress, what reasoning was made about them actually guaranteed to progress?

(b)  did I miss something?

So the proposal from AEMO was…

Beginning half-way down p15/19 was the following (copied in here, in full, to make it easy for the reader):

‘Proposed generator and integrated resource systems commitment assessment

AEMO proposes to balance the risk of over- or under-estimating the reliability risks, and therefore the required reliability market response, by adjusting the interpretation of the commitment criteria so as to adjust the inclusion of projects in the reliability forecasts. While AEMO does not propose any changes to the five commitment criteria and questions, changes are proposed to how these categories are used.

AEMO proposes the following methodology changes for generation and integrated resource systems:

1. Committed projects that have met the commissioning requirements of their first hold point to be included in reliability forecasts at:

(a) the FCUD submitted by the developer.

2. Committed projects that have not met the commissioning requirements of their first hold point to be included in reliability forecasts at:

(a) Six months after the FCUD submitted by the developer.

3. Committed* projects to be included in reliability forecasts at the furthest date of either:

(a) The first day after the T-1 year for RRO purposes, or

(b) The FCUD submitted by the developer.

4. Anticipated projects to be included in the reliability forecast at the furthest date of either:

(a) the first day after the T-1 year for RRO purposes, or

(b) One year after the FCUD submitted by the developer.

These proposed changes seek to include a greater number of projects that are sufficiently likely to proceed, while sufficiently delaying developments that are less advanced and more prone to delays.

Transmission developments

AEMO’s current commitment criteria for transmission developments in the ESOO reliability forecast consider whether the development has successfully completed a Regulatory Investment Test for Transmission (RIT-T), or equivalent for smaller projects . All dates are implemented as provided by the developer.

Transmission developments in MT PASA and EAAP are only included where captured in operational constraints. No changes are proposed for MT PASA, however it is proposed that EAAP utilise ESOO methodologies (see section 3.1).

AEMO proposes to deploy a criteria consistent with the ISP methodology and the CBA Guidelines (and the RIT-T instrument). If the transmission project has satisfied all five criteria (similar to generation above), it is defined in the glossary of the RIT-T instrument as a committed project. If the project is in the process of meeting at least three of the criteria, it is defined as an anticipated project.

AEMO proposes the following application of commitment criteria for transmission developments:

1. Committed projects to be included in the ESOO and EAAP reliability assessments at the:

(a) commissioning dates provided by the developer.

2. Anticipated projects to be included in the ESOO and EAAP reliability assessments at:

(a) One year after the commissioning dates provided by the developer.

These proposed changes seek to include a greater number of projects that are likely to proceed, while sufficiently delaying developments that are less advanced and more prone to delays. They will improve the alignment with the application of the criteria with other generator and integrated resource system projects.

Aggregated DER developments  etc…’

[NOTE i have not copied this in, but it is there to read on p16-17]

So, at the end of the day:

• this helps resolve the ‘why’ the switch-a-roo with the ESOO came about
• … it does not speak to whether:
  • wise or unwise
  • useful or not
  • … especially in hindsight

Thanks to Ben Tudman (and others who have included us in conversation).