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 2021. Next steps are being taken by the AEMC’s transmission planning and investment review into whether delivery of major transmission projects can be streamlined.

  1. Access reform through a new Congestion Management Mechanism

ESB is undertaking a comprehensive stakeholder consultation on new arrangements for managing congestion in the National Electricity Market. The access reform work strand seeks to promote investment certainty, manage access risk, boost operational efficiency and incentivise technologies that alleviate congestion. These reforms are needed to provide a stable foundation for investment in State REZ schemes. The ESB has released a consultation paper that seeks feedback on four shortlisted models that have been developed through significant stakeholder consultation:

Investment timeframes   Operational timeframes  

Congestion zones with connection fees 

Investors receive clear up-front signals about which network locations have available hosting capacity.   

CMM with universal rebates 

Establishes a single, combined-bid energy and congestion market   

Transmission queue 

Investors that connect in uncongested locations receive priority rights. 

Congestion relief market (CRM) 

Changes to the market and settlements to provide separate revenue streams for energy and congestion relief.  

In assessing preferred models put forward in response to the project initiation paper published in November 2021, the ESB considered the key challenges and trade-offs associated with each model and particularly looked at how the models could support and strengthen State REZ schemes to ensure coordination across the NEM. 

Going forward, the ESB will continue to work with stakeholders to develop these models to a sufficient level of detail to support a recommendation to Ministers. The ESB anticipates that detailed design will be a hybrid model that incorporates one of the investment models and one of the operational models set out in this paper. 

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?

The ESB invites comments from interested parties in response to the consultation paper by 10 June 2022. The ESB intends to hold a webinar on the material covered in this paper on 26 May 2022, 2-4pm AEST. Interested parties are invited to register.  

    Key papers are available here:

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



    Project initiation paper

    18 November 2021

    Public webinar on project initiation paper

    26 November 2021

    Submissions due on project initiation paper

    28 January 2022

    Open seminar on alternative options for congestion management

    24 February 2022

    Consultation paper

    5 May 2022

    Submissions due on consultation paper

    10 June 2022

    Draft recommendations for detailed design

    September 2022

    Submissions due

    October 2022

    Submit proposed rule change to Energy Ministers

    Early December 2022

    Congestion management technical working group

    The ESB’s package of transmission and access reform includes measures to get transmission poles and wires, and generation, built when and where it is needed.

    Actionable integrated system plan rules for transmission investment are in place and underway. AEMO is working to prepare its third Integrated System Plan.

    Renewable Energy Zones planning rules are being used to progress actionable ISP projects to connect new sources of renewable energy supply. Separate advice on NEM-wide principles to apply to the implementation of REZs was given to Ministers on 3 June 2021 and adopted by National Cabinet on 1 October.

    New rules on dedicated connection assets will encourage investment in, and better use of, transmission infrastructure by making it easier for generators to share assets like power lines.

    FTI Consulting has examined the forecast prevalence of congestion in the NEM in 2030, assuming that generation, storage and transmission investment occurs in line with the ISP’s step change scenario.