The Australian Energy Market Operator’s Integrated System Plan (ISP) has been a disaster. Transmission lines that were identified seven years ago as “critical”, and that AEMO said would be commissioned by now, remain on the drawing board.
HumeLink (“SnowyLink North”) is now estimated to cost six times what AEMO said at first, and that is before counting interest during construction. Another $2 billion, at least, will be needed to get its capacity into Sydney, Wollongong and Newcastle. Likewise, Energy Connect, VNI-West (“Snowylink South”) and MarinusLink are now estimated to cost many multiples of what AEMO first said.
Most languish on the drawing boards and as they have festered, they have gathered a groundswell of furious opposition from affected communities and landholders.
In collaboration with others, for the last six years I have drawn attention to AEMO’s systematic under-cooking of costs and land-use impacts and over-egging of benefits, to conclude that AEMO’s “NEM-link” vision of massive interconnectors does not stack up.
A Senate Inquiry last year, chaired by David Van, welcomed the critique and called for improvements to National Electricity Market (NEM) governance to allow AEMO to course correct when required. The two Labor members of the inquiry dissented from the Inquiry’s report: the ISP was fine and AEMO was right, nothing to see here, they said.
Now, even AEMO has given up trying to hold back the tide, as Renew Economy reported last week. In its latest transmission network options report AEMO, while rejecting a mea culpa, now suggests it “will re-visit transmission network projects previously identified as needing to proceed, with the exception of projects that have advanced to anticipated or committed status, seeking to ensure that overall costs for consumers are optimised.”
This is a watershed moment. It is our best opportunity yet, to radically re-think the expansion of transmission needed to deliver the rapid decarbonisation of Australia’s electricity supply. A central planner, with the best will in the world, can’t know what needs to be known to develop a plausible transmission expansion plan for a system as large as the National Electricity Market.
Generation and storage technologies are changing extremely quickly, demand growth is now very uncertain, and much of the information on the social and environmental impact of transmission is only revealed when the metaphorical rubber comes close to hitting the road.
Local and regional planners will be much better equipped to deal with such uncertainties and find agreeable plans. AEMO has had a bottomless pit of money to set grand plans centrally. After seven years, even it now accepts the plans it has developed are wrong.
So, where to from here? To start, “social licence” must not any longer be treated as an abstract concept, to be achieved through “consultation.” Affected communities and landholders need to be brought into the decision-making process and transmission expansion plans negotiated and settled with them, and with user groups.
AEMO has valuable electrical engineering expertise and can take a NEM-wide perspective on the engineering of the power system. This is AEMO’s forte and it should provide its advice on this without fear or favour, free from the burden of producing an “optimal development plan” that purports to encompass so much of what AEMO knows little about. This is roughly how things were before AEMO was asked to develop an “actionable” Integrated System Plan.
The jurisdictions must, once again, be responsible for transmission expansion planning in their regions. Interconnectors between regions should be an issue for their origination and agreement, not AEMO’s imposition. The implementation of arrangements for “negotiated settlement” of intra-regional transmission augmentation within their regions should be developed and overseen by state-based entities.
Some states will prove better at transmission planning, and negotiated settlement, than others. But un-shackled from the straight jacket of central conformity, innovation and adaptation will be promoted, speeding up the creation and dissemination of new knowledge and skills.
What is the role of the Commonwealth in this? There seems to be little reason to doubt that the decarbonisation of electricity supply at the rate that the Australian Government is seeking, can’t be achieved without large amounts of policy support for generation and storage.
Following the enormous surge in their borrowings over the last decade, the three big states (NSW, Victoria and Queensland) have no-where near the fiscal capacity needed to make an energy transition at the rate that Australian Government policy is seeking. Commonwealth financial support will be essential if its policy is to be achieved, and in much bigger doses than currently on the table.
Perhaps a renegotiation of the Australian Energy Market Agreement that underpins the NEM, to formalise the rights and obligations of the Commonwealth, is inevitable. At the heart of such renegotiation must be respect for the evidence that an energy transition that is centrally directed, will continue to fail. There is no time to lose in reforming institutions to reflect this.
Professor Bruce Mountain is director of the Victoria Energy Policy Centre
