Learn more about the binding requirements for AEMO in the development of its Integrated System Plan (ISP) and for project proponents undertaking actionable ISP projects.
Who uses the CBA guidelines?
The Cost Benefit Analysis (CBA) guidelines are published in accordance with clause 5.22.5 of the NER.
The CBA guidelines are required to be used by:
AEMO is required to use the CBA guidelines in preparing the ISP.
In doing this, AEMO identifies an optimal development path for the national energy market that promotes the efficient development of the power system, based on a quantitative assessment of the costs and benefits of various options across a range of scenarios.
Our guidelines set out certain binding requirements to ensure that AEMO will select the optimal development path following a best practice approach.
The guidelines include discretionary and binding requirements on how the set of development paths chosen for assessment should reflect a representative sample of the full range of possible transmission investment combinations. This also includes how to quantify classes of costs and market benefits in preparing each development path in each scenario.
After valuing the costs and market benefits, the CBA guidelines set out the process that AEMO is required to follow to select the optimal development path.
The CBA guidelines also outline the steps AEMO and an actionable project's proponent must undertake to complete an additional feedback loop process upon the completion of the RIT-T and identification of a preferred option. The purpose of AEMO running the feedback loop is to ensure that the preferred option identified by the RIT-T for the actionable project remains on the optimal development path in the most recent ISP.
Project proponents use the CBA guidelines in applying the Regulatory Investment Test - Transmission (RIT-T) to actionable ISP projects.
Actionable ISP projects are those that are intended to address an identified need in an ISP and which form part of an optimal development path for system planning. The CBA guidelines require the application of a slightly modified RIT-T for these projects.
After completion of the RIT-T and before submitting a contingent project application to the AER, the proponent must write to AEMO requesting the completion of a feedback loop for the preferred option from the RIT-T. While we do not validate or otherwise engage with the feedback loop process, a successful feedback loop test is necessary for us to consider a contingent project application for the project.
RIT-T proponents also use the CBA guidelines for actionable ISP projects in assessing whether a material change in circumstances has occurred that may require the RIT-T to be reapplied as per clause 5.16A.4 of the National Electricity Rules.
How the guidelines apply
The table below outlines how our CBA guidelines relate to the different stages of developing an ISP and applying the RIT-T process to actionable ISP projects.
ISP process | Guiding section of CBA guidelines |
|---|---|
AEMO develops inputs, assumptions and scenarios to use in ISP cost benefit analysis.
| Section 3.2 |
AEMO selects development paths for assessment and estimates their costs and market benefits.
| Section 3.3 |
AEMO selects an optimal development path. This will contain actionable ISP projects.
| Section 3.3 |
These projects are chosen to meet an identified need which triggers a RIT-T.
| Section 3.4 and 3.5 |
The relevant proponent applies a RIT-T to each actionable ISP project using the identified need. It must also include the ISP candidate option as a credible option.
| Section 4.3 |
The proponent chooses a preferred option using the results of their cost benefit analysis.
| Section 4.3 |
AEMO checks this preferred option is aligned with the most recent optimal development path from the most recent draft or final ISP through a feedback loop test.
| Section 3.5 |