Introduction

The Investor Group on Climate Change (IGCC) welcomes the opportunity to provide feedback on the Australian Energy Regulator’s (AER) Network Resilience Guidelines – Consultation Paper. IGCC is a collaboration of Australian and New Zealand institutional investors focused on the impact of climate change on investments. Collectively, members have total funds under management of over $4 trillion in Australia and New Zealand. As long-term owners of critical infrastructure, including electricity networks and generation assets, IGCC members have a strong interest in ensuring regulatory settings support efficient, forward-looking investment in climate resilience. There is already a significant body of evidence showing the detrimental impacts of climate change on infrastructure both currently and into the future.

High-level feedback on consultation paper

IGCC supports the AER’s efforts to provide greater clarity on resilience expenditure. However, the consultation paper focuses primarily on process, rather than strategic issues shaping network resilience. IGCC encourages the AER to strengthen its broader approach to network resilience by closing gaps in climate science and risk assessment, strengthening system-level coordination and risk alignment, and standardising financial and economic assessment of resilience. Furthermore, the regulator should consider community vulnerability in resilience assessments, support efficient and flexible adaptation pathways, and improve the transparency and predictability of resilience decision-making. These priorities align with IGCC’s recommendation to update regulations to consider resilience over the full lifespan of assets.

Closing gaps in climate science and risk assessment

A constraint on resilience investment is the lack of consistent, high-quality climate and hazard data for the energy sector. While Network Service Providers (NSPs) are increasingly undertaking climate risk modelling, approaches remain fragmented, assumptions vary, and hazard coverage is incomplete. Resilience planning often remains heavily informed by historical conditions, despite climate change increasing the frequency and severity of physical risks. IGCC recommends that the AER support national development of fit-for-purpose climate data inputs by engaging with the Australian Climate Service and other data providers. It also promotes the consistent use of forward-looking climate risk assessment methodologies, such as those outlined in IGCC’s guide, Resilient Infrastructure: Physical Climate Risk Assessments for Defensible Decision-Making. The regulator should encourage the development of sector-relevant hazard models and extend the definition of resilience beyond acute events to include chronic climate risks like increasing temperatures.

Strengthening system-level coordination and risk alignment

While the consultation paper recognises the role of multiple actors in supporting community resilience, it provides limited guidance on system-level coordination and prioritisation. IGCC recommends that the AER provide guidance on system-level priorities, including priority infrastructure types, high-risk geographies, and communities with limited adaptive capacity. The regulator should demonstrate leadership by defining system-level risk appetite, including target levels of resilience for priority assets to avoid over- and under-adaptation. Clear expectations are required for the trade-offs between resilience, reliability, and cost. IGCC advocates for the promotion of consistent decision-making frameworks across NSPs, even where specific delivery approaches differ.

Standardising financial and economic assessment of resilience

A barrier to efficient investment is inconsistency in how resilience expenditure is defined, assessed, and justified. There remains significant variation in how NSPs define resilience versus reliability expenditure and how they quantify benefits and avoided costs. IGCC recommends that the AER develop a standardised framework or template for resilience proposals, supported by clear definitions of what constitutes “additional” adaptation expenditure and consistent treatment of costs and benefits. The introduction of a taxonomy or classification system is suggested to distinguish between baseline reliability expenditure, incremental adaptation measures, and broader system or community resilience investments. Regulatory settings should support fit-for-purpose resilience strategies and align incentives to prioritise proactive resilience investment rather than post-event cost recovery.

Considering community vulnerability in resilience assessments and expenditure

IGCC strongly supports the AER’s focus on community resilience, noting that investors increasingly recognise the importance of social dimensions in climate adaptation. However, the consultation paper does not address the disproportionate impacts of outages across communities, such as the greater economic and social disruption in rural and regional areas where alternatives are limited. The AER should consider community vulnerability when assessing resilience expenditure proposals and support targeted investment in vulnerable communities. Recognising the link between reliability and social license is particularly important in areas hosting new energy infrastructure.

Supporting efficient, flexible adaptation pathways

There is uncertainty about the physical impacts of climate change on network resilience over coming decades. To manage this uncertainty and avoid over-investment in long-lived assets, adaptive pathways may be more efficient than one-off capital investments. These pathways may involve incremental operational expenditure, preventative maintenance, monitoring, or staged adaptation measures. IGCC recommends that the AER support a broader set of adaptation solutions, including non-network solutions like demand response and distributed energy resources, modular and flexible infrastructure, and temporary or mobile assets. Expenditure assessment frameworks should appropriately recognise preventative and operational investments.

Improving transparency and predictability of resilience decision-making

Regulatory certainty enables efficient long-term resilience investment. Investors and NSPs require a clear understanding of how resilience expenditure is assessed, what evidence is expected, and how trade-offs are evaluated. Greater transparency can reduce regulatory risk and improve investment quality. IGCC recommends that the AER provide greater transparency regarding how resilience expenditure proposals are assessed and publish guidance and examples demonstrating how resilience, reliability, and affordability trade-offs are considered. Improving feedback mechanisms will support learning and consistency across future proposals.

Responses to consultation questions

IGCC provides specific views on the consultation questions, noting that the current framing of resilience, focused on outages longer than 12 hours from extreme events, is too narrow. The group supports extending the guidelines to transmission network service providers given their importance to systemic resilience. It also supports new reporting requirements on actual resilience spend through Annual Information Orders, provided they are targeted and decision-useful. IGCC recommends that Distribution Annual Planning Reports (DAPR) include forward-looking physical climate risk assessments, explanations of adaptation measures, and clear articulations of risk appetite and decision frameworks.