Regulator approves grid upgrade that will boost new renewables projects

The network interconnector linking the New South Wales and Queensland electricity grids will receive a boost, with the Australian Energy Regulator approving upgrades that it proponents say will improve reliability and open the door to new solar and wind projects.

TransGrid, which owns the interconnector, welcomed the approvals, saying they will help to improve the reliability of supplies in both states, and has received financial backing from both the Federal and New South Wales state governments.

“The [Queensland-New South Wales Interconnector] project has been fast-tracked with the support of the Federal and NSW Governments which provided a joint agreement to facilitate the upgrade,” TransGrid CEO Paul Italiano said in  a statement.

“While early works have been underway since October last year, we are looking forward to breaking ground on the civil construction work in coming weeks and delivering this project on time.”

With an expected outlay of $218 million, the project has secured more than $100 million in government underwriting support, and after the Australian Energy Market Operator stressed the need for additional interconnectors in its Integrated System Plan, as well as featuring in the NSW government’s transmission infrastructure plan.

The AER said that it had fast-tracked its assessment of the project, to ensure that works could be completed by mid-2022. Part of the urgency for the network upgrades is the need to strengthen NSW electricity supplies with the expected closure of the Liddell power station in 2023.

Reassured by this, NSW energy minister Matt Kean welcomed the announcement having helped facilitate the $102 million underwriting deal stuck with the federal government.

“Completing the QNI upgrade early is critical to ensure NSW can access affordable and reliable power following the closure of the Liddell power station in April 2023,” Kean said.

“Our strong and early action to accelerate the project means it can now be delivered more than one year ahead of schedule.”

TransGrid expects the upgrades to deliver up to $170 million in net economic benefits to consumers, while boosting the transmission capacity by 190MW, with 150 jobs to be created during the construction phase of the network upgrades.

The AER said that it had signed off on the upgrades after an assessment of the investment case for the project, concluding that strengthening the interconnector would deliver overall benefits to consumers.

“Our job is to assess projects and make sure they represent the long term interests of consumers. It is also important that we do so in a thorough and efficient manner,” AER chair Clare Savage said.

“We tested the reasonableness of TransGrid and Powerlink’s inputs and assumptions across a range of scenarios and found that the project is robust and will deliver a net economic benefit to Australian energy consumers,” AER chair Clare Savage said.

With the approvals in place, TransGrid will be able to recover an additional $28.2 million from electricity customers over the next two financial years, with the figure being revised down by the AER from an original claim of $30.3 million, after the regulator assessed that the cost of project overheads would be lower.

The cost of the upgrades will be passed on to consumers through higher network tariffs, estimated to amount to an increase of $2 per year in residential electricity costs, but the benefits of the project will easily outweigh these added costs.

“Consumers will get value for money from this investment, including wholesale market cost savings. The cumulative benefits are expected to exceed the investment cost within seven years,” Savage added.

In March, the Australian Energy Regulator approved the project’s Regulatory Investment Test for Transmission (RIT-T) assessment, concluding the project stacked up economically for energy consumers who will ultimately cover the cost.

The upgrades will allow more electricity to be shared between New South Wales and Queensland, boosting the ability for both states to manage electricity supplies, particularly during periods of high demand.

The announcement was welcomed by the Energy Networks Association, which represents network companies like TransGrid, saying it help lower electricity costs for consumers.

“A more efficient transmission system can deliver benefits to the entire National Electricity Market,” ENA CEO Andrew Dillon said.

“Increased grid capacity creates the opportunity to move cheaper electricity around the country, helping keep household bills down.

Works will include replacements to existing transmission towers and poles and the rolling out of new transmission lines. Much of the work will occur in the New England region of New South Wales, which has been earmarked as a future Renewable Energy Zone by the state government.

TransGrid will also upgrade the substations at Tamworth, Dumaresq, Armidale and Muswellbrook, which will manage the expanded electricity transfers while providing further improvements to reliability.

The expansion of capacity in the interconnector, and other transmission network infrastructure in the region, will ultimately be a benefit to plans to expand the New England region’s wind and solar capacity, helping zero emissions electricity to be distributed throughout the National Electricity Market.

TransGrid expects to ramp up construction works for the upgrades shortly, with the expanded network capacity coming online in the second half of 2021.

Upgrades to interconnectors linking the networks of Australian states have received greater attention as a crucial tool in managing grid reliability, as regulators realise they can help coordinate electricity supplies, particularly those from wind and solar projects.

In February, the Australian Energy Market Commission signed off on new rules to facilitate the streamlining of approvals for new interconnector projects, including a proposed new link between Robertstown in South Australia and Wagga Wagga in New South Wales.

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