different from previous strikes the right projects funded under balance. This is not the DMIA. This overly prescriptive, but duplication meant that directs distributors to potentially redundant use the allowance in projects were receiving ways that will build funding, limiting the market/industry effectiveness of the understanding of R&D under the DMIA. demand management. The Allowance Objective requires that projects funded under the Mechanism have the potential to reduce Some stakeholders long-term network suggested that projects costs for consumers. be required to demonstrate customer In the context of innovation, benefits. However, we felt it best to define distributors and other reducing costs in the stakeholders context of that project's considered that doing Have the potential, if proved overall ability to so would dramatically viable, to reduce long contribute to narrow the range of term network costs in developing the demand projects they would be that it be designed to: management and able to undertake, industry knowledge, build demand management undermining the goal to rather than a strict capability and capacity promote innovation in adherence to project the demand benefits. explore potentially efficient management sector. It demand management options is our view that while This allows distributors to projects under the the allowance Scheme, must directly experimentally, while still directing them to deliver net benefits, this is not a reasonable implement potentially expectation for R&D, efficient solutions. which has uncertain Exploring this potential results by nature. is vital to building market/industry understanding and commercialising solutions. The Mechanism is intended to provide funding for innovative solutions that would not otherwise be available. Not contain costs that are: This aims to fund innovation, rather than recoverable any other allowing distributors to jurisdictional incentive scheme, recover extra for simply recoverable under any state or undertaking actions As this is a requirement of Australian Government scheme, that are otherwise the NER, we did not or prudent and should be consult on this issue. included in their included in forecast capital revenue allowances. expenditure or operating This clause aims to expenditure approved in the prevent distribution determination. dipping' of R&D revenue, thereby increasing the Mechanism's value to electricity consumers.
different from previous projects funded under the DMIA. This duplication meant that potentially redundant projects were receiving funding, limiting the effectiveness of the R&D under the DMIA. strikes the right balance. This is not overly prescriptive, but directs distributors to use the allowance in ways that will build market/industry understanding of demand management. Have the potential, if proved viable, to reduce long term network costs in that it be designed to: build demand management capability and capacity explore potentially efficient demand management options The Allowance Objective requires that projects funded under the Mechanism have the potential to reduce long-term network costs for consumers. In the context of innovation, we felt it best to define reducing costs in the context of that project's overall ability to contribute to developing the demand management and industry knowledge, rather than a strict adherence to project benefits. This allows distributors to the allowance experimentally, while still directing them to implement potentially efficient solutions. Exploring this potential is vital to building market/industry understanding and commercialising solutions. Some stakeholders suggested that projects be required to demonstrate customer benefits. However, distributors and other stakeholders considered that doing so would dramatically narrow the range of projects they would be able to undertake, undermining the goal to promote innovation in the demand management sector. It is our view that while projects under the Scheme, must directly deliver net benefits, this is not a reasonable expectation for R&D, which has uncertain results by nature. Not contain costs that are: recoverable any other jurisdictional incentive scheme, recoverable under any state or Australian Government scheme, or included in forecast capital expenditure or operating expenditure approved in the distribution determination. The Mechanism is intended to provide funding for innovative solutions that would not otherwise be available. This aims to fund innovation, rather than allowing distributors to recover extra for simply undertaking actions that are otherwise prudent and should be included in their revenue allowances. This clause aims to prevent of R&D revenue, thereby increasing the Mechanism's value to electricity consumers. As this is a requirement of the NER, we did not consult on this issue. dipping'
AER%20-%20Explanatory%20statement%20-%20Draft%20demand%20management%20innovation%20allowance%20mechanism%20-%20%2028%20August%202017.docx