As part of the Energy Security Board's post 2025 market design process the Australian Energy Market Commission (AEMC) is proposing to introduce locational marginal pricing (LMP) and financial transmission rights (FTRs) into the NEM. If implemented electricity prices for all generators which participate in central dispatch would vary across the NEM based on network constraints and FTRs would be available as a financial instrument to hedge this risk.
AGL has provided a submission to the AEMC’s interim report on these proposed reforms and a cost benefit analysis report from NERA Economic Consulting. While the introduction of LMP and FTRs in theory could further improve the efficient location of new investment in the NEM, AGL considers that whether they are required and will be cost effective remains an open question. The NERA report does not adequately resolve this uncertainty since it relies on too many flawed assumptions and has too many limitations. AGL is also concerned the proposed reforms may raise barriers to entry in the NEM by increasing complexity and reducing contract market liquidity.
Read the full submission here.