Review and validation of AEMO's cost of capital assumptions for renewable energy investments
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.
Get in touch
Kristian Kolding
Head of Consulting, OE Australia
+61 (4) 1040 9070
Kristian Kolding
Head of Consulting, OE Australia
Sydney, Australia
Kristian leads Oxford Economics Australia’s Consulting team, working with public and private sector leaders to help them prepare for the future by applying relevant economic theory and forecasts to inform effective policy and business strategy development.
Ruchira Ray
Lead Economist, Climate & Sustainability
Ruchira Ray
Lead Economist, Climate & Sustainability
Sydney, Australia
Ruchira joined Oxford Economics Austalia in 2019, in macroeconomic consulting. Ruchira has worked on several buy side and sell side Due Diligence projects for assets spanning energy, transport, and real-estate. Additionally, Ruchira leads our climate change consulting team in Australasia.Ruchira also has experience in the energy sector, working on several gas and electricity outlook reports for the Australian Energy Market Operator (AEMO), leading the development of industrial sector demand forecasts including regularly interviewing energy intensive industrial users of gas and electricity; producing retail gas price forecasts and conducting scenario setting consultation with industry.Ruchira is also well versed with operating our Global Economic Model (GEM) to produce scenario forecasts.
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