Australia’s renewable energy industry is today celebrating the Australian Energy Regulator’s (AER) final approval of costs for Project EnergyConnect, the 900-kilometre South Australia to New South Wales (with a short spur into Red Cliffs in northwest Victoria) high-capacity electricity interconnector, which is forecast to unlock some 1,800 MW of renewable energy generation in its path, and create more than 2,600 jobs across the region.
“This is the first major electricity project to receive a green light under AEMO’s Integrated System Plan for the east coast,” said Rick Francis, Manager of Spark Infrastructure which holds a 15.01% interest in TransGrid, project developer on the NSW side of the connector.
TransGrid today reached Final Investment Decision on Project EnergyConnect (PEC), as a result of the AER approval, and after having resolved a major hurdle in financing the infrastructure build with the support of the Clean Energy Finance Corporation (CEFC).
The CEFC will provide a $295 million hybrid security instrument — the biggest investment it has made in its history — in the form of subordinated notes, which the Corporation said this morning has “contributed to the crowding in of further private sector debt to this critical project”.
Francis said that without the CEFC support, “TransGrid’s credit metrics would have been materially and negatively impacted, such that EnergyConnect would have been unable to proceed.”
Renewed calls for review of the RIT-T
That the project came so close to derailment, after years of planning and consultation which officially began with the Regulatory Investment Test for Transmission (RIT-T) project assessment draft report being submitted in Q2 of 2018, testifies to the insufficiency of existing procedures for bringing infrastructure to bear on energy transition requirements.
The pace of regulatory approval of infrastructure projects, which seeks to minimise costs to consumers, and anticipate developments that might make major investment infrastructure projects obsolete, has proven so slow that in February 2020, Victoria decided to introduce legislation that would allow it to fast-track priority projects such as grid-scale battery storage and transmission.
“Navigating a project of this type and size through the existing rules has exposed a number of fundamental flaws in the regulatory process that must be addressed if necessary investment in critical new transmission infrastructure to unlock further renewable generation is to continue,” said Francis from the investor perspective.
A slew of benefits will finally be realised
Aside from providing a metaphorical superhighway of connection opportunities for large-scale renewable projects in previously lane-grade grid constrained but high-resource areas; and aside from generating thousands of jobs in both PEC construction (up to 1,700 jobs) and resulting renewable energy build out (an estimated 950 jobs in the region), PEC’s benefits as listed by the CEFC also include:
- Annual net energy savings to householders of about $100 in South Australia and $60 in New South Wales, despite the distributed costs of paying for the project which the AER calculates at $6 per annum for SA households and $11 for NSW households in the financial year 2022-2023; and $17 for SA households and $22 for NSW households for each year from 2023-2028.
- Enabling SA to export more of its renewable energy production into the National Electricity Market (NEM) to help meet increasing demand, and supplement the grid when more northern geographies experience seasonal or weather-related decreases in production.
- “By creating a second point of connection between SA and the NEM, the PEC will significantly reduce the risk of the SA grid being “islanded” or disconnected from the NEM,” says the CEFC.
- The CEFC adds that having an alternate interconnector from SA to the rest of the NEM will enable critical maintenance to be performed at the existing nearby Heywood Interconnector — which will indirectly benefit Victoria’s industrial users such as the Alcoa Portland aluminium smelter, increasing reliability of electricity supply.
Rick Francis said, “As a long term investor,” Spark Infrastructure is “excited” by the opportunities inherent in the project.
Next steps from the Southern renewable-energy powerhouse…
ElectraNet, the South Australian partner in PEC, today also welcomed the Australian Energy Regulator’s approval of the expenditure required to deliver the $2.28 billion project, including $457.4 million for ElectraNet to construct the SA section of the interconnector.
It said, “The ElectraNet Board will review the determination by the AER and consider its final investment decision on the project in the coming days.”
In New South Wales, TransGrid has finalised its Engineering Procurement and Construction contract with SecureEnergy for construction of its larger component of the interconnector, which will stretch from the border intersection of SA, NSW and Victoria, through Buronga (where a branch will be built to connect to Red Cliffs in Victoria), and on to Wagga Wagga.
SecureEnergy is a 50/50 joint venture of two international engineering and construction groups: Australian firm Clough, and Spain’s Elecnor.
Construction of the project is expected to commence late this year, and to achieve commissioning in 2023.
Transmission is critical to joining the transition dots
Kane Thornton, Chief Executive of renewables industry body the Clean Energy Council, commented today, “While it’s great to see Project Energy Connect progress to this stage … The pace of change in the energy transition warrants a major overhaul of the regulatory process for transmission.”
He highlighted the importance of other transmission projects identified in the Australian Energy Market Operator’s Integrated System Plan, to enable coordinated and reliable operation of a grid based on clean energy generation.
Once up and running PEC will abate “an estimated one million tonnes of carbon emissions each year,” said TransGrid CEO, Paul Italiano, “contributing significantly to meeting Australia’s climate change targets.”
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