AGL comments on the AER’s customer export curtailment value methodology

The Australian Energy Regulator (AER) is currently consulting on the development of the Customer export curtailment value (CECV) methodology that is intended inform a more robust approach to assessing distribution network service providers’ (DNSPs) proposed expenditure as an input into network planning, investment, and incentive arrangements. This reform follows the Australian Energy Market Commission’s final determination on distributed energy resources (DER) access and pricing, that recognised DNSPs’ export service obligations.

AGL supports the development of the CECV, that will support the accelerating uptake in DER and the scaling of business models such as orchestration. This is in line with the policy direction articulated by the Energy Security Board (ESB) in its Post-2025 Market Design. It will be critical that the AER’s network expenditure assessment framework enables consumers being rewarded for their flexible demand and generation.

In developing curtailment scenarios as an input into CECVs, we would recommend the AER align its proposed curtailment scenarios with 5-minute market settlement. This will support modelling that more appropriately values the role of flexible generation sources such as DER and is consistent with current wholesale market dynamics and pricing. The level of aggregation of CECVs should in turn reflect individual DNSPs’ proposed investment approaches.

We anticipate a range of complexities in the AER’s proposed approach to forecasting and modelling wholesale market benefits and costs. These complexities will need to be carefully weighted to mitigate inaccuracies and/or overestimations that could otherwise result in inefficient DNSP expenditure, the cost of which would be borne by consumers.

We do not consider the AER should establish any direct or causal relationship between CECVs and export pricing. Any future export charges should be defined in terms of each network's intrinsic hosting capacity. Export pricing should also be driven by cost recovery with respect to provisioned capital and operational expenditure, as elaborated in DSNPs’ approved regulatory reset proposals.

We also look forward to engaging with the AER in updating its broader Expenditure Forecast Assessment Guidelines, a critical complementary reform to support DER integration.

We elaborate our views in our formal submission, a copy of which is available here.