Truths and tropes of transmission costs: How much are consumers really paying?

One of the category errors which keeps rearing its head amongst both the anti-renewables brigade and PeopleWhoShouldKnowBetter(TM) is the trope of how transmission costs are passed on to customers.

The following statements are true:

1. Network costs constitute circa 30-40% of a consumer’s energy bill.

2. A significant expansion of the transmission network costing many billions of dollars has been proposed to support building renewable generation in windy and sunny parts of the country with insufficient infrastructure.

The category error lies in the suggestion that this transmission buildout will smash consumer bills by some order of magnitude, or that transmission costs constitute a materially significant portion of consumer bills.

Transmission costs are recovered from two places – residential and C&I consumers via distribution network tariffs, and directly from generators connected to the HV transmission network (typically as capacity charges).

Distribution costs on the other hand are largely recovered from consumers (and the handful of distribution-connected generation and storage assets).

There is also an order of magnitude difference in the size and complexity of the transmission and distribution network infrastructure. Per the AEMC State of the Energy Market report 2024 (figs 3.2 & 3.3 on p70):

– Transmission accounts for ~ 44,000 km of lines with a total RAB of $26B

– Distribution accounts for ~ 768,000 km with a total RAB of $90B.

Even with a huge expansion in the transmission system these costs will remain a small proportion of consumer energy bills – the transmission expansion comes alongside more generation connecting to the grid, which also pay for some of the costs.

Per the AEMC Residential Electricity Prices Trends 2024 report (p36) Transmission costs account for ~10% of total network costs, and aren’t projected to materially increase over the next decade.

None of this is to suggest that we shouldn’t have a debate about the costs, viability and necessity of the transmission buildout, or how those costs are recovered.

But can we have an *informed* debate, please?

Alex Leemon is a self-described “NEM Nerd” and manager, customer and energy markets manager at PolarBlue