CEFC makes biggest investment yet to help “close looming gaps” in NSW grid

The federal government’s green bank has joined the effort to get the New South Wales energy transition back on track, announcing $490 million in debt finance for EnergyCo, to help deliver key grid upgrades in the state’s Central-West Orana Renewable Energy Zone.

The investment, which draws from the $19 billion set aside for the federal government’s Rewiring The Nation (RTN) Fund, marks the largest single transaction for the Clean Energy Finance Corporation, yet.

But CEFC chief Ian Learmonth says this is just the first of many big transmission transactions, aimed at bringing the Australian grid up to speed with the exit of centralised coal power and the shift to firmed solar and wind.

“This $490 million investment marks an important milestone for the CEFC as well as the new RTN Fund,” Learmonth said on Thursday.

“The considerable scale of this commitment draws on our experience in leading investment in our clean energy future. As the second commitment through the RTN Fund, it also signals the strength of our focus on delivering much needed capital in a timely manner to this large and complex investment task.”

For EnergyCo, the NSW government body responsible for delivering the Central-West Orana REZ, a key task is to develop new twin double circuit 500 kV transmission lines between Wollar and the proposed substations at Merotherie and Elong Elong, and connections to solar, wind and battery projects.

The CEFC money – some of which will be go towards things like land acquisition, but most of it to the purchase of biodiversity offsets in the sort of quantities required for transmission upgrade projects like this – will underpin these works.

EnergyCo says the concessional loan could mean shaving as much as $240 million off the total project costs over its 20-year tenure, while also speeding up delivery. It will also help avoid driving up energy costs for consumers.

The money comes as the Australian Energy Market Operator (AEMO) warns of a potential breach of reliability standards in New South Wales in 2025/26, due to delays to major transmission upgrades and to the connection of big battery projects.

The Central-West Orana REZ, with its “strong mix of energy resources and significant investor interest,” as the scoping report puts it, has huge potential to really get the ball rolling in the NSW energy transition.

At approximately 20,000 square kilometres in size and spanning the land of the Wiradjuri, Wailwan and Kamilaroi peoples, it is expected to unlock at least 4.5 GW of new network capacity by the mid-2020s.

“We cannot over-state the importance of this investment in helping to close looming gaps in our energy system as coal-fired generators exit the power mix,” says CEFC chief investment officer for the RTN Fund, Paul McCartney.

“The CWO-REZ will bring together key transmission, generation and storage assets, located near important low-cost renewable energy resources.

“Development of the REZ is forecast to bring as much as $10 billion in private investment to this exciting part of NSW by 2030, strengthening the regional economy as well as our energy grid,” McCartney says.

To help get the job done, EnergyCo has appointed ACEREZ, a consortium formed by Acciona, Cobra and Endeavour Energy, as its preferred network operator to design, finance, build and operate the CWO-REZ.

EnergyCo says the transmission project is currently working to gain environmental approvals and to reach financial close, which is planned for the latter part of this year.

“Investing in our energy grid is one of the most exciting and important tasks ahead of us as we look to our net zero future,” Learmonth says.

“There is both urgency and opportunity. As much as 46 per cent of coal generation will exit our energy system by 2030, and 100 per cent by 2038.

“With access to some of the world’s best solar and wind resources, such as those in the Central-West Orana region, we have the potential to use this change to propel ourselves into a low emissions renewable energy future.”