The cost of new transmission line projects have soared by up to 55 per cent over the past two years, leading to a major rethink of how Australia navigates its transition from coal to renewables over the coming decades.
The huge cost jump, particularly for overhead lines, is detailed in a key document – the Draft 2025 Electricity Network Options Report – published by the Australian Energy Market Operator (AEMO) on Friday as part of a two-yearly consultation on network inputs for its Integrated System Plan (ISP).
The document is notable for another two concessions – the question of social licence for massive transmission projects, and the role that local networks could play in hosting renewable and storage projects at a lower cost, and with lesser disruption.
The ISP, the market operator’s multi-decade planning blueprint, maps a path for Australia’s main grid to 82 per cent renewables by 2030 and beyond, replacing coal with a mix of solar, wind and storage, backed by significant investments in transmission upgrades.
But AEMO says the soaring cost of new grid infrastructure means the 2026 ISP will need to re-visit transmission network projects previously identified as critical, with the exception of projects that are already committed, in a bid to limit the impact on consumer energy bills.
“The 2026 ISP 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.” (See map below.)
This could include a new focus on the potential role that could be played by distribution networks, which – for the first time – are being brought into the tent on ISP planning by AEMO.
Australia’s distributed electricity networks say they have become the missing piece of the planning puzzle for Australian’s green energy transition, and insist they can host vast amounts of wind, solar and storage capacity at a fraction of the cost of the planned focus on new transmission lines.
“The paradigm was let’s do everything in the high voltage network,” England told Renew Economy’s Energy Insiders podcast in March.
“There’s this huge opportunity sitting in the middle of all that, called distribution networks, with capacity, with land, with capabilities to actually do a lot of that at a much lower cost.
”And we should talk about that. And if we could do a lot of that at a much lower cost for customers, then we believe this could be a more productive transition.”
In its report this week, AEMO concedes that the ISP has historically focused on consumer energy resources uptake as an input, and the optimisation of transmission network investment and utility-scale generation and storage development as an output.
But the market operator says it has now begun engaging with distribution networks to incorporate important insights about their networks and the broader roles they could play in future ISPs.
“This report provides, for the first time, proposed distribution network opportunities to facilitate the operation of CER and other distributed resources,” the report says.
“These would add to the existing ability of the distribution networks to connect and operate CER across the NEM and may be required to operate the forecast uptake of CER (and other distributed resources) in the various ISP scenarios.
The new approach to planning follows an update to transmission project cost estimates that places them between to 25% to 55% higher (in real terms) for overhead lines than in the 2023 update, and approximately 10% to 35% higher (in real terms) for substation projects.
AEMO says transmission network companies and other jurisdictional planning bodies say the increased cost of tendering processes and project delivery are being driven by a combination of factors.
These drivers include sustained supply chain pressures on materials, equipment and workforce, market competition as numerous major projects race to get up, and project complexity, including an increased number of projects planned for remote areas.
Another major cost driver has been tied up with social licence, as transmission companies provide additional community and landholder engagement along proposed transmission line routes – often paying the price of bungled or non-existent previous efforts at consultation.
In the report, AEMO and acknowledges that placing the appropriate value on social licence as a key input of the energy transition is “an area of continued learning and development.”
“In this report, AEMO incorporates the results of new land use analysis into the transmission network options,” it says.
“Additional costs have been included in network options to represent the potential need to change proposed transmission line routes to avoid traversing particularly complex areas for delivering transmission infrastructure, signalling potential realignment of transmission lines to less complex areas.
“AEMO has not included community sentiment research results in these early, conceptual options as this research is not sufficiently granular and because community sentiment changes over time.
“AEMO understands the high importance of prioritising community and stakeholder engagement as projects develop beyond the conceptual stage.”
