Network sets out $3.5 billion case for new link to remove bottlenecks between renewables and cities

Transgrid is leaning towards a roughly $3.5 billion poles and wires upgrade as it weighs its options to close a gap in the “ring” of transmission lines linking New South Wales’ coastal load centres with its renewable energy zones and other major network upgrades and mega-projects, like Snowy 2.0.

In a Project Assessment Draft Report (PADR) published on Monday, Transgrid has outlined six possible ways forward for Sydney Ring South, a project identified by the Australian Market Energy Operator (AEMO) as necessary to shore up the electricity supply to Sydney, Wollongong and Newcastle.

“As coal-fired power stations reach end-of-life, our electricity is increasingly sourced from lower-cost renewable energy sources located across NSW,” said Jason Krstanoski, Transgrid’s executive general manager of network, in a statement on Monday.

“That means the existing transmission corridor approaching Sydney from the south is under increasing pressure, creating a bottleneck that limits electricity flow and reduces our ability to deliver new cheaper forms of power to our rapidly growing cities and support an increasingly electrified modern economy.”

The PADR, which is the first stage in the independent cost-benefit regulatory process, proposes a range of options, including augmentations to the existing 330 kV network and a new 500 kV transmission line that would more than double the capacity of the southern transmission corridor into Sydney.

Transgrid says the preferred technical option, at this early stage, is a 500 kV transmission line from Bannaby in the Southern Tablelands to South Western Sydney, coupled with the installation of series reactors as power flow controllers on the 330 kV network.

This solution – listed as Option 6 in the PADR – is currently estimated to cost just over $3.5 billion and would be targeted for staged delivery between 2030 and 2034.

Transgrid says this option could deliver an estimated $3.2 billion in net market benefits for NSW consumers and the broader economy, including annual power bill savings of up to $51 for a typical NSW household and around $110 for an  average small business.

The report also says Option 6 would cost $3.2 billion less than building and operating an alternative (or counterfactual) energy system that would instead rely on a mix of generation and storage investments that would otherwise be required within the Sydney Basin to meet their long-term needs.

“This project will help secure and power our growing communities across Greater Sydney, support future jobs and investment, keep downward pressure on electricity bills and ensure impacts on local  communities are carefully managed,” says Krstanoski.

Transgrid has recently come under fire for major cost blow-outs on its part of the Project EnergyConnect, that recently prompted the network giant to petition the AER for a re-do of its 2023-28 revenue determination, to recover an extra $1.1 billion of $1.5 billion from consumers.

Project EnergyConnect is a 900 km transmission link connecting South Australia and NSW and Victoria that is considered “nation-critical” for its role unlocking up to 3.5 gigawatts of new renewables capacity in south-west NSW, and to help South Australia get to 100 per cent net renewables by 2027. 

The 206 km portion of the project in South Australia was completed in December 2023, by ElectraNet, on time and on budget.

But, the NSW side – a 700 km line from the border to Wagga Wagga and two new substations at Buronga and Dinawan – has faced a series of issues, culminating in a major contract failure, that have blown out total project costs from $1.8 billion to $3.6 billion and delayed delivery.

Transgrid has argued that these costs – and the contract failure – were outside of its control. Critics – including big-three gentailer AGL Energy – disagree, pointing instead to Transgrid’s failure to exercise effective oversight following the contractor Clough’s insolvency, and failure to act as a prudent operator or to enforce its fixed-priced contract.

As well as Project EnergyConnect, Transgrid is also working on a number of other major grid upgrade projects, including HumeLink, the Victoria to NSW Interconnector West (VNI West) and the line and substation upgrades needed to connect the Central-West Orana Renewable Energy Zone (REZ).

The PADR for Sydney Ring South says that while it’s too early, yet, to identify a project corridor, route or preferred technology, the costs for all options involving a new 500 kV transmission line are based on an overhead transmission design, which is typically the cheaper way to go for upgrades of this sort.

But Transgrid also acknowledges “strong community interest in undergrounding” of major new transmission network lines, and has therefore considered the potential for partial undergrounding in the PADR assessment.

In one case, preliminary assessment of an option that reduces community impact, including partial undergrounding up to 20 km of the line, is estimated to increase costs by up to $2.7 billion.

The PADR also notes that Transgrid is considering non-network solutions, like grid-scale storage, to bolster the grid. But it points to analysis that shows a “significant number of grid-scale storage projects” would be needed in the Sydney, Newcastle, and Wollongong regions, even if Sydney Ring South is developed.

At this stage, Transgrid says the early delivery of a 500 kV transmission line delivers the highest net market benefits of all options considered, and “performs well across a range of plausible scenarios, particularly those involving strong growth in electricity demand.”

“The [PADR] the start of the conversation, with no route or corridor selected as yet, and we are encouraging the community, businesses and all stakeholders to get involved in the engagement process and make a submission to help inform ongoing detailed planning,” Krstanoski says.

“While planning is in the early stages and no decisions have been made, Transgrid is inviting early  feedback from communities, consumers, government, industry and other interested stakeholders to  help shape the future of the project.” 

Transgrid says the Sydney Ring South Market Modelling Report prepared by EPEC Engineering will be published by mid-June 2026 as a supplementary document to the PADR, as will the Cost Benefit Assessment model prepared by Houston Kemp.

The next step of the process is to undertake a detailed stakeholder consultation process on the outcomes of the PADR, after which will come the Project Assessment Conclusions Report (PACR), which provides further assessment into the proposed preferred option with a consultation and submission period.

“While planning is in the early stages and no decisions have been made, Transgrid is inviting early  feedback from communities, consumers, government, industry and other interested stakeholders to help shape the future of the project,” Krstanoski says.

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