Powering the Nation: A Comprehensive Analysis of the Australian Energy Market
Oxford Economics Australia undertook a comprehensive review of the Australian Energy Market Operator's cost of capital assumptions for long-term investments in the National Electricity Market, supporting the effectiveness of the Integrated System Plan in promoting low-cost renewable energy and transmission development.
Project background
The Australian Energy Market Operator (AEMO) engaged Oxford Economics Australia (OEA) to review their cost of capital assumptions for long-term investments in the National Electricity Market (NEM). The review aimed to assess the impact of asset-specific and market risks on the cost of capital. The cost of capital assumptions are key to developing the Integrated System Plan (ISP) – a roadmap for Australia’s transition to net zero emissions. The engagement with us was necessary to validate these assumptions against empirical evidence, ensuring the ISP’s effectiveness in promoting low-cost renewable energy and transmission development.
Approach and solution
Our review involved an in-depth analysis of the cost of capital assumptions and a detailed examination of the various risk factors affecting energy investments. An industry survey and consultation with key industry stakeholders was used to gather evidence for the review. Our findings validated AEMO’s assumptions, reinforcing the effectiveness of the Integrated System Plan (ISP) in promoting low-cost renewable energy and transmission development.
Conclusion
The review validated AEMO’s assumptions, reinforcing the ISP’s effectiveness in promoting low-cost renewable energy and transmission development, thereby aiding Australia’s transition to net zero emissions.
