The Australian Energy Market Operator (AEMO) and TransGrid have published for consultation a draft proposal to increase the interconnector transfer capability between Victoria and New South Wales (NSW). AEMO finds this investment to be in the long-term interest of Australian energy consumers

“Under this proposal, AEMO’s initial analysis shows that for every dollar invested in increasing the transfer capacity between Victoria and NSW, the project is expected to deliver approximately four times that in net market benefits. This will help to lower the cost of electricity in the long term. Furthermore, this investment is a critical early step in our Integrated System Plan to achieve a lowest cost portfolio of resources and strategic transmission development that meets consumer energy needs today, and into the future,” AEMO Chief System Design and Engineering Officer, Dr Alex Wonhas, said.

Electricity transfers between Victoria and NSW are currently restricted by thermal, voltage stability and transient stability limitations. Without prudent and timely investment, these limitations will increase the underlying economic cost of electricity as a result of reduced access to lower-cost generation produced in the southern states, and increased need for new generation investment to maintain adequate supplies. 

The Project Assessment Draft Report (PADR) published today marks step two of the Regulatory Investment Test for Transmission (RIT-T) consultation process and details an investment proposal to increase transmission capability from Victoria to NSW by approximately 170 megawatts (MW) and deliver net market benefits of approximately $286 million (M) (all figures in present value terms). These benefits are largely the result of cost savings achieved through more efficient dispatch of generation in Victoria and NSW, and reduced capital costs associated with new generation build in NSW, lowering the cost of electricity for consumers over time. AEMO now looks forward to working with stakeholders to test and refine the assumptions where necessary to ensure any investment decision is taken in the best interest of Australian consumers.

The proposal includes the following augmentations with an optimal time of delivery by 2022­–23:

  • Install a second 500/330 kilovolt (kV) transformer at South Morang Terminal Station
  • Re-tensioning the 330 kV South Morang – Dederang transmission lines, as well as associated works (including uprating of series capacitors) to allow operation at thermal rating
  • Install modular power flow controllers on the 330 kV Upper Tumut – Canberra and
    Upper Tumut – Yass lines to balance power flows and increase transfer capability

This proposal has an estimated capital cost of approximately $68 M and yields the highest net market benefits under all the future scenarios and sensitivities assessed, delivering gross market benefits of approximately $354 M.

Dr Wonhas says the well documented energy transition underway is impacting the operation and capabilities of the existing power system.

“From a system perspective, we are seeing significant congestion in some areas of the network as new generation projects come on line, and also increased system reliance on interconnections between regions to meet energy supply requirements where ageing coal generators are withdrawing from the market. These limitations are putting consumers at risk of paying more than necessary for their electricity as a result of inefficient generation build and dispatch costs,” Dr Wonhas said.

The need to increase transfer capability between Victoria and NSW was identified in AEMO’s 2018 Integrated System Plan (ISP) which set out an optimised national pathway for development of the power system that would maximise the value of new and existing resources across the National Electricity Market (NEM) while aiming to deliver energy reliability at the lowest cost to consumers. The ISP identified that immediate action was required on several fronts and designated these as priority ‘Group 1’ projects. This group included the need for increased transfer capability between Victoria and NSW.

In mid-2018, AEMO as the planner for the shared transmission network in Victoria and TransGrid as the transmission network planner for NSW, jointly initiated a RIT-T to assess the technical and economic viability of increasing the transfer capacity between Victoria and NSW to reduce market costs across the NEM. The RIT-T is a regulated three-step market consultation process designed to identify the transmission investment option that achieves the highest net economic benefit to all those who produce, consume and transport electricity in the market, and ultimately protect consumers from paying more than necessary for electricity in the long-term.

“As the independent energy market and power system operator, AEMO continues to work with industry and governments to pursue urgent market reforms and efficient and timely investment in the national grid to reduce costs and ensure the system is future-oriented to deliver lowest cost energy supply when and where it is needed most,” Dr Wonhas said. 

More information including an analysis of all the credible options assessed is available in the full PADR available for download.

AEMO and TransGrid welcome written submissions from stakeholders on this PADR, including comments on the inputs, analysis and choice of preferred option. Submissions should be emailed to planning@aemo.com.au by Friday, 11 October 2019.