Network seeks to charge data centres for full grid connection capacity, whether they use it or not

Transmission network company Transgrid is pushing for a rule change that would see large energy users pay for their full connection capacity to the New South Wales grid whether they use all of that capacity, or not. 

Transgrid CEO Brett Redman says the move to tighten the rules for major new energy users seeking to join the network is about protecting households and small businesses, as the Western Sydney part of the grid reaches capacity in the next few months.

“This will spread the fixed costs of the network across a much larger base,” Redman told an audience at a Committee for Economic Development of Australia (CEDA) event yesterday. 

“Our modelling indicates it would reduce like-for-like transmission costs for consumers by up to 15 per cent.

“It is a win for data centre developers, who are seeking connection certainty here in New South Wales. They have signalled their willingness to support it as a sign of their commitment to the market.”

Redman says much of the 10 gigawatts (GW) of connection enquiries received by Transgrid to date is connected to genuine projects. 

“That’s broadly the size of today’s average demand across the entire NSW system,” he said. “For those of you who subscribe to the phantom demand theory, I can tell you plenty of it is real.

“In recent months, about 1.5 GW of readily available capacity has been contracted. In the next few months, we expect this number to roughly double as proponents commit to funding further augmentation to increase capacity.”

Redman’s speech comes weeks after Transgrid told connection applicants that its network in western Sydney will be largely full by 2033, thanks to the huge influx of data centres.

In a letter, it said data centres may be able to join the constrained western Sydney grid but will need to pay upfront for network augmentations if they want to connect, because there is “limited scope” to accommodate them now.

However, Transgrid’s proposal to charge for full connection capacity whether it’s used or not has its critics.

Nexa Advisory CEO Stephanie Bashir says data centres are not fundamentally different to other major loads trying to connect and the answer shouldn’t be a “blank cheque” for networks to over charge.

“Consumers should not subsidise grid upgrades for private data centres. But equally, data centres should not be used as a vehicle to gold-plate the network or shift unchecked monopoly costs onto connecting customers,” she told Renew Economy.

“Data centres should pay their fair share of the network costs they trigger, but a blunt rule that forces proponents to pay for upgrades whether they use them or not risks replacing one problem with another.”

Transgrid to push data centres outwards

With Western Sydney reaching capacity, interest from data centre developers is finally beginning to move to the regions, Redman says.

“We are now seeing increased interest in places like the Riverina and the Hunter,” he said. “This shift is new. 

“The conflict in the Middle East has shifted that region’s demand to our shores. We’re now seeing genuine interest move beyond Sydney.

“It’s a reminder that Australia’s stability is not just a competitive advantage, it’s an economic opportunity, and one we are working with proponents to capture.”

Renewable energy developers have been courting data centres to co-locate on site at solar and wind projects, with Engie looking for interest for its grid-constrained Plains wind and now-abandoned solar project last year. 

But to date, interest in leaving cities for the less fibre-connected regions has been limited. 

Cloud Carrier has a planning application in for a massive data centre and gas power station in the southern highlands of New South Wales (NSW), and this week a Singapore-based company unveiled plans for 3 GW of solar and 1 GW of data centre in the Northern Territory. 

Redman says as they “settle immediate availability in Western Sydney”, Transgrid will start pushing data centres to move to the regions. 

“As demand forecasts become clearer, we will also support bringing on additional renewable supply. Whether that means taking advantage of ramping rooftop solar and household batteries or bringing on further grid-scale renewable projects,” he said. 

If you wish to support independent media, and accurate information, please consider making a one off donation or becoming a regular supporter of Renew Economy. Please click here. Your support is invaluable.