NSW on renewables: All talk, not much action

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What you learn in this note.

  • NSW has always been a net importer of electricity, putting it at risk if other states’ supply demand position changes.
  • NSW on present indications will be a much bigger importer after Liddell closes in 2022.
  • NSW talks a good talk on renewable energy but offers few actions to support the fine words. Its share of new renewables is far smaller than its share of electricity consumption and this is particularly marked in PV.
  • Transgrid has employed Aurecon to map and  identify two renewable energy zones in Southern NSW/ Northern Victoria, and in South western NSW that based on resource quality, suitable existing land use and transmission potential access could support 71 GW of new PV and wind. Yes 71 GW.
  • Transgrid only has capacity at present to connect 5 GW of new renewables across its own grid. Yet it already has 3 GW of transmission access agreements either done or under negotiation. Under privatized ownership its keen to develop the new renewable zones but this will require early stage transmission investment. It takes longer to build transmission than renewables.
  • We think a signal by Transgrid in the form of actually committing to transmission expansion in these zones would be seen as a signal by renewable developers to commit to new developments in NSW.
  • New transmission in the South and South west will in any event be required if Snowy 2.0 goes ahead expensive though Snowy 2 will be.
  • The NSW State Govt which will likely receive over $3 bn for its 58% stake in Snowy could help push some of that 3Gw of “nearly there” renewables over the line by a reverse auction or some other tangible support. This would be positive for NSW in many ways, energy security, regional development, environmental strength. Marginal  seats in say Eden Monaro could benefit greatly.

NSW has generally been a laggard in energy policy

The history of NSW electricity policy has been disappointing over many years. Arguably the worst part of the policy was the “trading rights” auction dreamed up by the ALP and Frontier economics. This eventually lead to Vales Point being sold for $1 million, and the only bidder for Macquarie Generation being AGL.

The Liberals embraced Macquarie’s sale to AGL and this withstood an ACCC challenge in the Australian Competition Tribunal [perhaps it should be renamed the anti competition tribunal].

AGL is showing itself to be a good steward of Macgen but there can be no doubt the merger has contributed to the tight market conditions customers face today.

The State ALP also essentially encouraged the NSW distributors Ausgrid, Essential and Endeavour but particularly Ausgrid, to gold plate their networks. The Liberals put a stop to additional gold plating and then sold off a good part of the networks.

The road to Hell is paved with good intentions. 

Having washed their hands of ownership but leaving NSW consumers with ageing coal fired generation, over capitalized networks with high running costs the Govt has then proceeded to move to the sidelines.

Fine speeches by Energy Minister Don Harwin and renewable advocate Amy Kean abound, but actions are few and far between and NSW is obviously lagging.

For instance a tender for 135 GWh (a puny 35 MW) of energy for the Sydney Metro was announced in January 2016 but we don’t think its been awarded yet. I guess prices have fallen. The NSW Govt has a net zero emissions “aspiration” by 2050, but visible support for new renewable energy is slim.

Snowy worth at least $3 bn to NSW and $1.5 to Victoria

For that matter if the Federal Govt ever gets around to buying NSW out of its 58% ownership of Snowy the NSW Govt would get over $3.5 billion on our rough estimates and the Victorian Govt over $1.7 bn.

Snowy, never an open company under “let’s keep it to ourselves” CEO Paul Broad has become even more secretive about its financials than ever.

It’s the people of Australia selling to the people of Australia but the people don’t get to see any numbers, only smart politicians can be trusted with the financials. Based on the FY16 minimalist annual report, which did at least identify the one offs,  we get to an enterprise value of $6 bn as follows.

Figure 1 Snowy keen to avoid any public scrutiny. Source: Company

Figure 1 Snowy keen to avoid any public scrutiny. Source: Company

We used 17X ebitda (a very high multiple) because of Snowy’s scarcity value as a large capacity hydro asset. This estimate of value could be wrong by $ billions.

The NSW Govt stake may have been worth as little as A$1 bn back in 2005 when an IPO of Snowy was attempted. Now we are guessing its worth over $3 bn. Anyhow, the money could easily be ploughed back into the electricity sector. Another question is whether Snowy 2.0 a hard rock tunneling project has any value and if so how much of that the NSW and VIC Govts can capture in the sales price.

Lagging NSW – the numbers speak for themselves

Despite those fine words of Harwin, NSW is in fact lagging other States.

In terms of new build NSW is responsible for about 21% of the total across the mainland States about half of its share of total electricity demand.

Figure 2 Share of new renewable build and total consumption. Source: ITK, NEM Review

Figure 2 Share of new renewable build and total consumption. Source: ITK, NEM Review

As disappointing as the overall figures are, considering that NSW has good resources and relatively low total renewable penetration, it’s the PV market where NSW – 159 MW  – is just 6% of the total under development. That’s a real shocker.

NSW is behind in the rooftop market as well, and even in the less than 10 KW household sector NSW performance is disappointing.

Figure 3 Residential solar penetration. Source: APVI

Figure 3 Residential solar penetration. Source: APVI

The tables above clearly shows how State Govt policies do produce outcomes. QLD with its 50% renewable target has 34% of the MW being built and Victoria with its 40% renewables by 2025 has 30% of the MW with more sure to be developed. Of course Victoria has a real new for more supply since Hazelwood closed.

However, it’s not just the renewable energy target of the State and the policies to support the target  that’s important its also the attitude towards transmission.

Queenslan for instance has its powering North Queensland plan. The main element of this is a $500 m (of which $150 m is funded) transmission loop running West of Townsville to basically facilitate the Genex Kidston and Windlab Kennedy energy parks.

That area of North Queensland and the projects announced to date might amount to say 2 GW of generation. A lot of that generation though is still a long way from anything but industrial load.

By contrast in NSW Transgrid has announced it has 3 GW of transmission connection agreements from various project proponents, but as yet none of those are proceeding.  If its happening in every other State except NSW, its worth asking why?

In any event about 5-6 GW of renewables are needed to replace Liddel.

Transgrid says it has limited new connection capacity

According to the Transgrid 2017 Transmission planning report only 5 GW of new capacity is available.

Figure 4 Transgrid existing new connection capacity. Source Transgrid

Figure 4 Transgrid existing new connection capacity. Source Transgrid

Transgrid proposed establishing 3 renewable energy precincts

Figure 5 Transgrid renewable energy zone. Source: Transgrid

Figure 5 Transgrid renewable energy zone. Source: Transgrid

Transgrid commissioned Aurecon to measure the potential in the South west and Southern renewable zones

Showing both the efficiency of a newly privatized business and with an eye on the returns on offer, Transgrid has gone further than just announce the zones. Its commissioned some preliminary analysis by Aurecon to analyse the potential for new PV and wind development in the South West and Southern Precincts. Aurecon analyzed land at a granular 50 x 50 metre grid based on three criteria.

  1. Resource potential (irradiance, wind speed)
  2. Existing land use;
  3. Access to transmission

The insight was taking account of existing land use. A GW of PV takes about 45 sq km of land. If you try to put those PV farms on prime agricultural land, it will at the least be expensive.

71  GW of high quality resource capacity

The headline conclusions of the study were that between Yass and Balranald (that is the South west Precinct) as much as 40 GW of PV could potentially be installed in sites meeting the study criteria. About 3 GW of wind could be added in that region.  In total looking at the South Precinct as well, and recalling that extends to North West Victoria about 71 GW was identified.

Figure 6 "The renewable coal fields of the future" Source: Transgrid, Aurecon

Figure 6 “The renewable coal fields of the future” Source: Transgrid, Aurecon

This renewable capacity would fit nice with Snowy 2.0 should that proceed, although Snowy 2.0 is only likely to provide and additional 2 GW of expensive  (hard rock drilled) pumped hydro capacity.

David Leitch is principal of ITK. He was formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution. 

Hear Giles Parkinson, David Leitch, and special guest John Grimes discuss this issue and more in this week’s Energy Insiders Podcast.


  • Peter F

    Transgrid would like the renewables in those areas because it will capture the revenues from transmission and be able to justify high transmission charges to pay for the new investment.
    If the renewables were placed much closer to the loads, eg over carparks, on roofs and small local windfarms connected to the distribution grid then no new 330kV links are needed. The system would be more robust and transmission losses lower.
    If you take the area east of a line from Tocumwal to Goondowindi, there is an area about the size of Germany. Germany is currently generating 200TWhr per year fom renewables but with inefficient solar and wind. New wind turbines in NSW would generate about 3-4 times the current average per turbine in Germany and new solar panels in those regions about 2.5 times the average German panel.
    In summary with the same number of wind turbines and solar panels per sq km that Germany has now, eastern NSW could generate 8-10 times the total demand in the area, in addition to the remote generation around Broken Hill, Balranald, Nyngan etc.

    If NSW pursued a policy of local generation almost all of its renewables could be connected to the existing 66,33,and 11kV distribution networks. It would reduce transmission losses and be much more robust in the face of weather extremes natural disasters or even cyber attacks

    • christopher

      Hi Peter,

      you approach is to keep solar generation close to the loads, however is this mapped anywhere – I would assume the loads are the city area’s and the closer you get the more expensive the land ?

      • Peter F

        Christopher the NREL did a study which suggested that 14% of the US roofs covered with 16% efficient solar cells would provide all the US peak power demand. US demand is about 10-15% higher per capita than us, roof area per person is lower and insolation is lower while over the next year or two 20%+ efficiency will become the norm so in theory if the US can produce peak demand from rooftop solar we can produce 200% of peak demand from rooftop solar.

        It does not have to be right next to the load there are excellent wind resources within 200km of Sydney that are close to the existing main transmission grid. In addition you have resources like the existing 220kV line to Broken Hill which can carry about 300MW. There is also vacant land like old tips, quarries, roadside and rail side embankments which are all used in Germany and Italy. In Italy you see solar farms in the centre of large roundabouts. railway platform roofs, carpark awnings etc.

        NSW needs about 65TWhr in total. To meet the 50% target within 200km of the load it requires 33TWhr from the same area that Germany is currently generating 200 TWhr. I think your estimate of 100 square km is about right but that represents less than half the area of Lake Hume or about 0.05% of the non forrested non urban land in the Eastern 40% of NSW.

        For a farmer if he can get a royalty of 2% of the solar generation from a square mile block of rocky land that would be over $650,000 per annum. The same land as sheep country might gross $100,000 per year as grazing land. For the same block of land he could put 9+ wind turbines on it and earn $90,000 in ground rent and keep his sheep.

    • christopher

      where do you suggest we locate 5 gw of solar to match coal baseline generation ( 10 km x 10km area )

  • Joe

    The NSW State COALition Government has had little interest in RE. I mean Premier Gladys is already on record as saying that… “we can’t transition to RE too quickly”. NSW is addicted to Coal. New Coalmines are being approved. The Hunter Valley is being turned into one mega coalpit. But I guess having the Port of Newcastle, one of the world’s biggest coal export terminals, then you need to keep shovelling the Coal. But things have to now change with closures of ageing Coal Power Stations being replaced by RE. The “we can’t transition to RE too quickly” is no longer an excuse.

  • George Darroch

    NSW is typically the state that holds back the nation. I think that once VIC shows its advantage it will be forced to follow.

  • solarguy

    David, in your opinion does Prof Blakers have a better and cheaper alternative to Snowy 2.0?