Cost to build first renewable energy zone in NSW blows out to $5.5 billion

The cost to build the Central West Orana renewable energy zone (CWO REZ) has risen again – thanks to the soaring price of civil construction – and is now estimated at $5.5 billion, slightly more than previous estimates but a massive jump from the original $650 million,

The CWO REZ is a 20,000 square kilometre area in central New South Wales (NSW) with Dubbo, Dunedoo and Wellington in the centre, and will initially deliver 4.5 gigawatts (GW) of network capacity for the 10 projects that secured access rights in May, and support up to 7.7 GW by 2038.

Those 10 solar, wind and storage projects with access rights currently have a planned capacity of 7.15 GW and storage of 5.2 GWh. 

But since it was declared in 2021, transmission costs have surged. The Australian Energy Market Operator (AEMO) has said costs are sometimes 100 per cent higher than in 2024, in its 2025 Electricity Network Options Report. 

Given last year’s estimate was based on 2023 assumptions, that means costs have doubled in two years.  For example, AEMO currently estimates the cost of VNI West at $7 billion, while its developers put it closer to $7.6 billion (with scope to be 30 per cent lower or 50 per cent higher), up from roughly $3.9 billion in 2023.

The Australian Energy Regulator’s (AER) revenue determination says $2.8 billion owed by the REZ operator ACEREZ to EnergyCo as Infrastructure Planner in fees covering pre-financial close construction, operations and maintenance costs.

ACEREZ is allowed to recover the cost of building out infrastructure to connect renewable energy projects over a 35 year period, but the AER says this will not entirely be covered by NSW electricity customers, but will also be pulled from the kitty of REZ access fees.

“The schedule of quarterly payments to be paid to ACEREZ over the first five years of the project (2025–29) [will be] $1,511.9 million,” the AER says.

Some of the work required to build out transmission in the CWO REZ. Image: AER

While the build-out is necessary to make the CWO REZ function, alternatives to expensive transmission are even catching the eye of AEMO functionaries. 

For the first time AEMO suggested more use is made of distributors to bring more consumer energy resources into the grid, while big batteries could provide augmentation options.

“AEMO has also included several distribution network augmentation options which would connect utility-scale generation and storage to high-voltage distribution networks, or sub-transmission networks,” AEMO says in its Electricity Network Options Report.

Already the Waratah Super Battery, located on the central coast of NSW, is functioning as a grid shock absorber, negating the need for more transmission through its System Integrity Protection Scheme.

Elsewhere, the Koorangie and Riverina batteries are stabilising weaker sections of the grid through contracts to run grid-forming inverters like virtual synchronous condensers, while also providing energy storage.