The Australian Energy Regulator (AER) has approved the new South Australia-New South Wales interconnector, which will enhance power system security and allow for the further development and integration of large-scale renewables into the nation’s main grid. The 900-kilometer transmission line built by ElectraNet and Transgrid is expected to unlock up to 30 new wind and solar projects totaling nearly 5.3 GW planned for South Australia, New South Wales, and Victoria.
On Friday, the AER published its decision to approve ElectraNet’s cost-benefit analysis i.e. Regulatory Investment Test for Transmission (RIT-T) application for Project EnergyConnect. In order to fast-track the assessment procedure for this top priority project, the regulator was allowed to run two processes concurrently looking at whether ElectraNet can recover the cost of the project and whether the proposed project is the best option for consumers.
“We’re satisfied, on the basis of the information ElectraNet has provided, that the SA-NSW interconnector is the best option for meeting the needs of consumers when compared to alternative options,” said AER Chair Clare Savage. “We’ve tested the reasonableness of ElectraNet’s inputs and assumptions across a range of scenarios and found that the project, as set out in the RIT-T, is robust and will deliver a net economic benefit to Australian energy consumers.”
Based on construction costs of $1.53 billion, the AER review identified $269 million in likely net benefits from the project against the $924 million estimated by ElectraNet. Although the economic benefits have been significantly downplayed, the AER said they were still substantial. Namely, residential customers in South Australia can expect to pay an extra $9 annually and NSW customers $5 for the project but, according to the regulator, “these costs will be more than offset by the benefits”.
“ElectraNet assumed that without the interconnector substantial gas-fired generation would be needed to keep the lights on in South Australia even with considerable new investment in wind, solar, batteries and synchronous condensers. The AER does not think it’s reasonable to assume that such large volumes of gas-fired generation will be required when there are cheaper sources of generation already available,” Savage said, adding the AER requested ElectraNet update their modeling “to reflect AEMO’s system security requirements and to allow these cheaper sources of generation to compete in the market”.
ElectraNet Chief Executive Steve Masters said today’s announcement was an important milestone for the project which remained the most “credible option that maximises the net economic benefit” in the National Electricity Market (NEM). “The Australian Energy Market Operator’s (AEMO) recently released draft 2020 Integrated System Plan identifies Project EnergyConnect as a ‘no regrets’ project for the national electricity market,” he said.
EnergyConnect has been identified as a priority project in both AEMO’s Integrated System Plan and the NSW Government’s Transmission Infrastructure Strategy. Once approved, it would be built near identified Renewable Energy Zones, to enable the connection of future renewable energy projects to the grid.
“With ElectraNet, TransGrid is committed to delivering the project at the lowest possible cost with the greatest benefit to energy consumers,” said Transgrid CEO Paul Italiano. “We are continuing to advance the project and will lodge a Contingent Project Application (CPA) later this year.”
On Friday, TransGrid announced it has shortlisted three bidders for the design and construction of the NSW section to be built from the South Australian border to Wagga Wagga. The tender will commence next month. The shortlisted bidders are: CPB Contractors & UGL Engineering, Elecnor Australia & Seymour Whyte Constructions and Quanta Power Australia.
TransGrid and ElectraNet have commenced preliminary works on the project, including preparations for cultural and geo-technical surveys and will work together on the submission of the CPA. Construction of Project EnergyConnect is due to commence in mid-2021 and be fully commissioned by 2023. It will provide 800 regional jobs during construction and 700 ongoing jobs.
The road to 100% renewables
Welcoming the approval of the SA-NSW Interconnector by the AER, SA Minister for Energy and Mining Dan van Holst Pellekaan said EnergyConnect was a key pillar of the Marshall Government’s energy policy and the first interconnector built in Australia for 15 years.
“The Australian energy landscape will be completely transformed during coming decades and the lesson of the recent past is that we need to take actions ahead of time to secure the best outcome for consumers,” said van Holst Pellekaan. “The Regulatory Investment Test for Transmission (RIT-T) approval shows that even when rigorously stress-tested, the interconnector delivers cheaper electricity to South Australians. As new wind and solar projects, above those in the 2018 base case, come online greater cost benefits will flow to households and businesses.”
On top of delivering billions of dollars of investment in renewable energy projects and hundreds of jobs along its route, EnergyConnect will allow South Australia to continue to expand its renewables fleet doubling the state’s export capacity. “South Australia is determined to be a good global citizen, and become a net exporter of renewable energy as part of our aspiration of net-100% renewables in the 2030’s,” the minister said.
The project will also give South Australia two connections to the National Electricity Market, improving the state’s electricity systems resilience to external shocks. “With climate change leading to increased extreme weather conditions such as storms, floods and fires, being interconnected with just Victoria leaves South Australia at real risk of becoming disconnected from the rest of the market,” the minister said.
Other benefits the interconnector would bring for South Austria include: access to surplus power interstate, including Snowy 2.0 project in NSW, as well as displacement of the costly gas generation in the state with the help of new energy storage, such as batteries and pumped hydro. For NSW, the interconnector would enable a smooth transition from its ageing coal-fired power fleet to low-emissions energy generation, allowing the state to bask into the surplus wind and solar power generated in SA.