Transmission and access

The rapidly changing mix of generation in the National Electricity Market (NEM) has implications for electricity networks – the networks that transport electricity from producers to users. While the network was built to bring electricity from large generators to major cities and industry, new renewables are much more spread out. There is a need to better coordinate new generation and network build to make sure the system overall is built and used efficiently, and to minimise costs to energy users.

The challenge

The shift to large-scale renewable generation is driving a wave of major new transmission projects and putting high-voltage power lines on the ground to carry energy to market. Per capita, Australia leads the world, by about 10 times the world average, in building renewable grid-scale generation. Coordinating transmission, generation and storage investments will help deliver new power supplies at least cost. This is particularly important as the national electricity market replaces most of its aging power stations over the next 20 years.

In the past four years, 121 new wind and solar projects have connected to the national grid with many more on the way.

That said, substantial additional transmission investment is needed to accommodate the forecast 26-50 GW of new large-scale variable renewable energy expected by 2040. Challenges are emerging in not only getting the new network built in a timely manner and at least cost, but also managing congestion.

The current pipeline of wind and solar developments significantly exceeds both the amount of new wind and solar in the ISP optimal development path, and the new transmission hosting capacity that is forecast to be made available.

New renewable investments often need to connect in different locations to where existing transmission infrastructure lies. Renewable Energy Zones (REZ) developments provide a good opportunity to better coordinate the renewable investment coming online. But this will not be enough to address congestion on the network and some generators will still be curtailed off the network. Further work is needed to avoid market disruption when generators are affected by constraints.

The development of access to and operation of an enhanced national transmission system is key to a successful transition. A more coordinated process for bringing new generation online improves the ability to connect to the grid and deliver renewable energy at least cost.

These reforms aim to do just that: increase investment efficiency, cut the cost of generation projects and get new generation to homes and businesses.

What we’re doing

The ESB has developed an Integrated System Plan (ISP) to help implement the priority network investments the plan has identified and deliver additional network capacity where needed. The ISP framework has now been enhanced to support the development of detailed, co-ordinated plans for Renewable Energy Zones (REZ). We have also prepared a set of principles to assist governments when establishing their own REZ schemes.

The two-part transmission and access pathway establishes a framework for generators and storage to connect to, and use, the system at the lowest possible cost.

  1. Transmission investment

ESB has already finished its whole-of-system framework for planning and implementing Renewable Energy Zones. The final paper was sent to governments in June 2021 and was adopted by the National Cabinet in October. AEMO enhancements of grid congestion reporting and forecasting are underway. Next steps are being taken by the AEMC’s transmission planning and investment review into whether delivery of major transmission projects can be streamlined. This review is already underway.

  1. Access reform through a new Congestion Management Mechanism

ESB is undertaking a comprehensive stakeholder consultation on a proposed whole-of-system Congestion Management Mechanism. This complements jurisdictional Renewable Energy Zones by signalling to investors which parts of the network have spare capacity available.

Under this approach, a dual mechanism of congestion charges and rebates would encourage generators and other large flexible loads, such as batteries and hydrogen to locate in Renewable Energy Zones to be eligible for rebates. All significant generators would face a congestion charge, reflecting the generator’s impact on congestion. Eligible generators, such as those in Renewable Energy Zones, would receive a rebate, funded from the revenue received from the congestion management charges.

Generators are still free to connect where they want. But if they want to get priority access to the network, then they will need to connect in a part of the network where network capacity is available, such as in a Renewable Energy Zone. Further work is needed to determine how much generation can connect in a given network location before congestion rebates cease to be available.

It will be necessary to strike a balance between giving investors flexibility to connect where they want and protecting investors from excessive congestion. The latter will also protect consumers, since excessive congestion increases costs for them, either through having to use electricity from more expensive generators or through building greater network capacity.

Where to next?

ESB is undertaking further detailed design work on their proposal. As indicated above, this will include comprehensive consultation with all relevant stakeholders and interested parties, the outcomes of which will be used to help achieve the optimal design of the final model.

  • Provide stakeholders with more clarity about the approach and process that we intend to use to give effect to National Cabinet's decision on transmission access reform, and
  • Give stakeholders the opportunity to submit alternative mechanisms. The paper articulates the challenges that the congestion management model seeks to solve, so that stakeholders knoenergyministers.gov.auw the criteria that their model will be assessed against.

The papers are available here:

Submissions on the project initiation paper are due by 28 January 2022. 

The key milestones for the congestion management detailed design process are set out below:

MILESTONE

INDICATIVE TIMING

Project initiation paper

18 November 2021

Public webinar on project initiation paper

26 November 2021

Submissions due on project initiation paper

28 January 2022

Detailed design consultation paper

March 2022

Submissions due on consultation paper

April 2022

Draft recommendations for detailed design

August 2022

Submissions due

September 2022

Submit proposed rule change to Energy Ministers

Early December 2022