AEMC Rule Change on Greenhouse Publication

The Australian Energy Market Commission (AEMC) has released a draft rule change outlining requirements for the Australian Energy Market Operator (AEMO) to publish a greenhouse intensity index number. This number would reflect the greenhouse gas intensity of electricity supplied in the National Electricity Market (NEM).

Why is this important?

Participants in the NEM (generators and retailers) are preparing for emissions trading by considering how carbon costs are factored into contractual decisions. Because each generator has a different emissions intensity, forward contracting would become incredibly complicated if every contract referred to a different intensity. Accordingly, some market participants asked the AEMC to require AEMO to publish an average intensity number which participants could refer to when entering into contracts.

How would it work (an example):

Consider a generator selling electricity to a retailer today for devliery in 2013. The contract would include a provision which would allow the generator to “pass through” the costs associated with the carbon price multiplied by the AEMO published emissions intensity.

As this is a draft rule change, there is an opportunity for public comment (due 17 June). Click here for more information.

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