Project Initiation Paper on Congestion Management Model

The Energy Security Board (ESB) is undertaking a comprehensive stakeholder consultation on a proposed whole-of-system Congestion Management Mechanism. This complements jurisdictional Renewable Energy Zones by signalling to investors which parts of the network have spare capacity available.

Under this approach, a dual mechanism of congestion charges and rebates would encourage generators and other large flexible loads, such as batteries and hydrogen, to locate in Renewable Energy Zones to be eligible for rebates.

All significant generators would face a congestion charge, reflecting the generator’s impact on congestion. Eligible generators, such as those in Renewable Energy Zones, would receive a rebate funded from revenue received from the congestion management charges.

Generators are still free to connect where they want, but for priority access to the network, they will need to connect in a part of the network where network capacity is available (such as in a Renewable Energy Zone). Further work is needed to determine how much generation can connect in a given network location before congestion rebates cease to be available.

It will be necessary to strike a balance between giving investors flexibility to connect where they want and protecting investors from excessive congestion. The latter will also protect consumers since excessive congestion increases their costs, either through electricity from more expensive generators or building greater network capacity.

Next steps

The ESB is undertaking further detailed design work on their proposal. This will include comprehensive consultation with all relevant stakeholders and interested parties. The outcomes of the consultation will be used to help achieve the optimal design of the final model. 

The ESB is currently consulting on a project initiation paper, which seeks to:

• Provide stakeholders with more clarity about the approach and process that we intend to use to give effect to National Cabinet's decision on transmission access reform.
• Give stakeholders the opportunity to submit alternative mechanisms. The paper articulates the challenges that the congestion management model seeks to solve so stakeholders know the criteria their model will be assessed against.

Submissions on the project initiation paper are due by 28 January 2022. 

While stakeholders are invited to provide feedback on any issues raised in this paper, the ESB’s priority is to understand the alternative options that stakeholders wish to put forward so that they can be given due consideration. Stakeholders will have further opportunities to consider and provide feedback on more detailed iterations of the CMM during subsequent stages of the consultation process.

Submission information

Key milestones

The key milestones for the congestion management detailed design process are set out below: