Identifying and committing eligible projects Clause 2.2 of the draft Scheme defines the type of projects that the Scheme will apply to ('eligible projects'). Table 1 summarises the elements of an eligible project. It also explains how each element will give effect to the rules, and how it incorporates stakeholder views. Table 1: Elements of project eligibility Element required for Regard to stakeholder Rationale for element 'eligibility' views We only require a distributor follow 'minimum project evaluation requirements' before This element acts an in-built accessing incentives compliance check to for non-RIT-D projects. verify that the Scheme We agree with the is only incentivising When identifying whether a views expressed by efficient projects that project is an efficient some stakeholders that deliver cost savings to non-network option, a we should not add retail customers, by: distributor has either requirements where completed a RIT–D or existing processes, like Requiring the distributor conduct 'minimum project the RIT-D, already a cost-benefit analysis of its evaluation address the relevant credible options for addressing requirements' issue. network constraints; and For details relevant to how Subjecting this analysis to third we the specified party testing. 'minimum project evaluation requirements', see section 5.2. This position is consistent with many stakeholders' views that support efficiency assessments at the network planning Adopting the term 'preferred stage. option' used in the While some stakeholders caution against Streamlines the assessment It is efficient if it is a credible quantifying broad process with the RIT-D. option to meet an market benefits, others identified need on the Captures the concept of 'net specifically supported distribution network, economic benefits' referred to in this approach. We where that credible NER cl. 6.6.3(c)(3). consider this analysis option is the preferred necessary to deliver Aligns with an 'efficient option. the NER's intent, but option', which we note it can also be interpret as needing to meet an complex, costly and identified need/network subjective. We have constraint. therefore developed some worked examples using 'rule of thumb' approaches to estimating broad market benefits.
Identifying and committing eligible projects Clause 2.2 of the draft Scheme defines the type of projects that the Scheme will apply to ('eligible projects'). Table 1 summarises the elements of an eligible project. It also explains how each element will give effect to the rules, and how it incorporates stakeholder views. Table 1: Elements of project eligibility Element required for 'eligibility' Rationale for element Regard to stakeholder views When identifying whether a project is an efficient non-network option, a distributor has either completed a RIT–D or 'minimum project evaluation requirements' This element acts an in-built compliance check to verify that the Scheme is only incentivising efficient projects that deliver cost savings to retail customers, by: Requiring the distributor conduct a cost-benefit analysis of its credible options for addressing network constraints; and Subjecting this analysis to third party testing. We only require a distributor follow 'minimum project evaluation requirements' before accessing incentives for non-RIT-D projects. We agree with the views expressed by some stakeholders that we should not add requirements where existing processes, like the RIT-D, already address the relevant issue. For details relevant to how we the specified 'minimum project evaluation requirements', see section 5.2. It is efficient if it is a credible option to meet an identified need on the distribution network, where that credible option is the preferred option. Adopting the term 'preferred option' used in the Streamlines the assessment process with the RIT-D. Captures the concept of 'net economic benefits' referred to in NER cl. 6.6.3(c)(3). Aligns with an 'efficient option', which we interpret as needing to meet an identified need/network constraint. This position is consistent with many stakeholders' views that support efficiency assessments at the network planning stage. While some stakeholders caution against quantifying broad market benefits, others specifically supported this approach. We consider this analysis necessary to deliver the NER's intent, but note it can also be complex, costly and subjective. We have therefore developed some worked examples using 'rule of thumb' approaches to estimating broad market benefits.
AER%20-%20Explanatory%20statement%20-%20Draft%20demand%20management%20incentive%20scheme%20-%2028%20August%202017.docx