Investment Tests for Transmission Networks

In common with many other parts of the world, Australia’s National Electricity Market (the electricity wholesale market for the eastern and southern states of Australia) is undergoing unprecedented change in the transition to a low carbon system. Technical, environmental, political and economic factors are driving changes in the way energy is produced, while consumption is also changing with the roll-out of smart meters, increasing digitalisation and deployment of electric vehicles.

In light of these developments, it is unsurprising that the role of electricity transmission – the network of high voltage electricity cables that conveys electricity from producers to consumers – will also need to evolve.

The Australian Energy Market Operator has commissioned FTI Consulting-Compass Lexecon Energy to examine how different jurisdictions across the globe consider the case for investment in electricity transmission networks. The use of so-called “Regulatory Investment Tests for Transmission”, or RIT-T, is currently a subject of considerable debate in Australia and the report has contributed to the discussion by providing an international perspective. Our report compared various elements of investment tests used in Europe and the US to the RIT-T, and identified potential lessons for the RIT-T design and application.”

We revisited the investment tests used in GB in a separate assessment, which examined how the investment test for transmission is impacted by the wholesale power market design. (Link)