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The Energy Security Board (ESB) scrapped the criticised congestion management model (CMM) it previously put forward to Energy Ministers. Following the criticism of industry stakeholders, the ESB has short-listed four alternate models to review.
The CMM was proposed by the ESB to improve locational signals to investors and to reduce the burden of grid congestion in the NEM. The CMM proposed to charge generators outside of Renewable Energy Zones (REZ) a ‘congestion charge’ and reward generators a ‘congestion rebate’ if they were located within a REZ or an area with extra capacity.
The ESB’s proposal involved a complex settlement process with regional variety which was heavily criticised by industry stakeholders for its complexity. Stakeholders argued that the CMM would eventually decrease investor certainty – one of the CMM’s main targets.
The ESB considered extensive stakeholder feedback and shortlisted four alternate models in its most recent consultation paper.
What does this mean for developers?
The ESB’s response means that grid congestion will continue to be a contentious issue PPA and financing negotiations for renewable energy generators. Although it seems certain that a change will come, it is unclear how generators’ revenue streams will be affected if a new model is adopted.
If you would like to know more about the ESB’s proposed alternate models, please reach out to Matt Baumgurtel or Cedric von Duering.
Matt Baumgurtel leads the New Energy team at Hamilton Locke.
Cedric Von Duering is a lawyer in Hamilton Locke’s New Energy team.