rss
8

Kangaroo Is. loses challenge to network plan that threatens renewables

Print Friendly

Kangaroo Island has lost its first-of-a-kind challenge to a network investment decision, but in doing so has highlighted some of the major problems around the rules and regulations used to justify regulated investment in poles and wires.

As we reported in March, the Kangaroo Island administrator and council launched an unprecedented challenge against SA Power Networks over its decision to effectively close an opportunity for the island to become a major exporter of renewable energy. It was the first time a Regulatory Investment Test (RiT-D) has been disputed in such a way.

The dispute was over a decision by SAPN to build only a 33kV cable between the mainland and the iconic tourist island, rather than spending a few million more and allowing the cable to be upgraded to a 66kV link, providing the opportunity for the island to export renewable energy.

kangaroo island

The AER upheld the SAPN decision, but not without first giving the network operator a slap around the chops for the way it justified the investment. It also highlighted problems with the narrow definition that such regulated investment decisions are made. It recommends changes.

This is an important development. For years, many analysts have complained that the regulatory tests are too inflexible, and allow network operators to ignore alternatives and simply reinforce, or “gold plate,” their investment. Some networks have also complained that the narrow rules prevent them from seeking alternatives, such as localised micro-grids.

Many in the Kangaroo Island community had hoped that the decision on whether to replace the ageing cable would lead to an opportunity for the island to generate its own power – mostly through renewables – while maintaining a link with the mainland.

But SAPN decided that a new cable was the most economically efficient option, and would cost only $25 million, effectively undercutting the 100% renewable energy plan. But it rejected an option for a 66kv cable that could carry more capacity, and would cost just $1.9 million more.

The island commissioner and the council protested, saying that SAPN had failed to take into account higher demand forecasts, from its own tourism outlook, and other benefits such as increased jobs from local renewable energy generation and avoided fuel costs from having local, or decentralised generation (wind and solar).

The AER criticised aspects of SAPN’s assessment, particularly in the way it considered the 66kV option and the wide range of values it put on the cable replacement, which AER said was not in line with the best industry practice.

But its most impactful observation may be on the way the rules are framed. The AER suggested that the exclusion of “other market benefits” such as jobs and avoided fuel costs should be changed.

This could have a significant impact on the way such proposals are considered in the future, particularly in “edge-of-the-grid” options where the cost of network replacement can be prohibitive, and the obvious solution is decentralised energy, and a combination of wind, solar, storage and micro-grids.

“We note our consultant’s comments regarding the RIT-D and the inability of stakeholders, or indeed us, to propose additional market benefit categories or review the decision of a RIT-D proponent not to include additional benefit categories,” the AER noted.

“Given the rising trend of distributed generation, we consider that the RIT-D Application Guidelines may benefit from revision in relation to the potential for other market benefits to arise (particularly avoided fuel costs).”

Chris Dunstan, from the Institute of Sustainable Futures in Sydney, which did analysis on a possible 100 per cent renewable energy scenario for Kangaroo Island, says that if the rules were different then there could have been a different outcome.

It would have allowed proponents to make a different decentralised offer, underlining the local benefits to the island.

Still, Dunstan says, the AER’s conclusions provide hope that the rules could change, and could be significant for the proposed demand response incentive scheme, which looks at efficient demand-side options, rather than the traditional supply side that has dominated Australian energy investment.

The result, however, will be of little comfort to the Kangaroo Island campaigners, and Dunstan laments the case as a missed opportunity to develop Kangaroos Island as landmark example of renewable end decentralised energy.  

RenewEconomy Free Daily Newsletter

Share this:

  • Goldie444

    What! and for only an additional cost of $1.9 million for 66kv upgraded from 33kv. This would allow electrons to be sent from the island back to the main land when they might need a few more kWhs when there is a high over southern Australia and the wind is not blowing. What’s the state Govt doing OR not doing to allow this to happen.

    • Chris Fraser

      The AEMC rules on allowing consideration of extended ‘business’ benefits in the upgrade need to be brought into the next century. At the moment they appear to be inflexible. If there was a shovel ready windfarm on the Island to make that export available they may have been able to argue a quicker return on the additional investment, even though $2m is so meagre.

  • trackdaze

    Park a battery on the island end of the line and always export at maximum capacity.

  • BushAxe

    The current cable is only 10MVA so a new one of similar size will have little opportunity for grid export. There’s huge potential for both on/offshore wind on the southern coast so a project of that scale would need it’s own transmission line to the mainland.

    • wmh

      Cable capacity varies as the voltage squared since the major cost in a cable is the conductors not the insulation, so a 66KV cable would have four times larger power rating than a 33KV cable.

      • BushAxe

        The 66kv option would be operated at 33kv giving the same 20MVA rating, they would have to rebuild the current 33kv network on both sides of the cable at significant cost ($25m+) to 66kv to get the full 40MVA capacity. Highly debatable whether it’s justified on economic grounds considering the small export capacity.

  • Ian

    Why not crowd-fund the extra 2 million and give it to the twats to install the larger cable.

  • Pathetic, narrow minded and, ultimately, this decision will become a self inflicted wound to the SA’s energy security, not to mention Kangaroo Islands!